CITATION: R. v. Eid, 2016 ONSC 3221
COURT FILE NO.: 12-20041
DATE: 2016-05-02
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
HER MAJESTY THE QUEEN
– and –
ROLAND EID
Defendant
M. Welch, and V. Brewer, for the Crown
R. Adelman, for the Defendant
HEARD at OTTAWA: April 7-9, 13-17, 20-24, 27-29, May 13-15, 19-22, 25-28, June 24, July 13, December 18, and 21, 2015; February 29, March 1, and 2, 2016.
Ray, J
TABLE OF CONTENTS
Page
Overview and Executive Summary 2
Evidence 10
Positions of the Crown and the Defence 74
Relevant Legal Principles 75
Analysis 77
Count 1 77
Count 2 83
Count 3 84
Count 4 86
Count 5 83
Count 6 87
Count 7 87
Count 8 86
Count 9 88
Count 10 88
OVERVIEW- EXECUTIVE SUMMARY
[1] This Executive Summary or Overview portion of my written decision is to be read along with the rest of this written decision for completeness. I will only be reading the Executive Summary portion of this written decision Then, I will distribute the complete written decision including this executive summary. If there is an appeal, it will not be necessary to obtain a transcript since this written decision is my official decision.
DISCOVERY
[2] January 7, 2008 at 10am, Mounir Ghadban, an ICI senior manager, received a telephone call from the defendant, the operating mind of ICI (6364144 Canada Inc., operating as ICI Construction Management) who he thought was in Florida, telling him the money -$1.7 million- was frozen, was not going to be returned to Canada; and that he, Mr Ghadban, was to call the bonding companies and shut the company down. The defendant was calling from Lebanon. Mr Ghadban and the other senior managers had discovered that the bank accounts were empty, the files on the defendant’s computer had been deleted, and they were in shock. Their pay cheques had bounced and they were all out of a job. They had expected the defendant to return with the money along with a matching amount on January 3, 2008 so the company could pay its subcontractors and payroll; and continue in business. The return date had changed to January 6, 2008 when the defendant had spoken to Tanya McLaughlin. Later it was learned that the defendant had sent an email January 5, 2008 to an Ottawa prefab concrete manufacturer telling him that he was now living permanently in Lebanon; and that he and Dalia Khalil had formed a new partnership under a new name that he was to deal with.
[3] The next day, January 8, 2008 when Lionel Foote, the general superintendent, learned of the turn of events, he telephoned all the trades on the remaining construction jobs, told them not turn up, cancelled a delivery of materials so it would not get caught by a creditor’s claim, and faxed out the performance bonds for all the projects.
THE SCHEME
[4] The defendant had made it very clear to the senior management of ICI throughout 2007, and more specifically by the fall of 2007 that he had plans for projects in Syria and Lebanon. The defendant told them in early November that in order to obtain financing for these projects, he had arranged a plan whereby $2 million was to be deposited into a bank account in Lebanon-Syria by the end of December 2007. The Syrian Government was going to match the fund - dollar for dollar – to finance and permit the projects to move forward. The defendant had been clear with the senior management that he would ensure that ICI’s $2 million would come back to Ottawa early in the New Year, 2008 so the company could meet its obligations, trades would be paid, and the company would move forward. It was even suggested that it would include the entire amount including the matching funds for a total of $4 million, although not everyone understood that to be the case.
[5] The defendant had arranged for a draft letter from an Ottawa law firm describing details of the return of the funds to Ottawa. He had also drafted a contract of purchase and sale of ICI to the bookkeeper/controller, Sebastien Dagenais, at the end of November 2007. The explanation he gave to Mr Dagenais was that he needed to be able show to the bank the reason for the large transfer of funds; and the sale of ICI to Mr Dagenais would account for the planned large transfer of funds. The sale was a sham. Mr Dagenais had neither the intention nor the where-with-all to purchase ICI. It was not the defendant’s company to sell. His wife was the sole shareholder. Even the name of the company on the agreement was wrong.
[6] The defendant had sent an email November 27, 2007 to his partner/employee in Lebanon, Dalia Khalil, asking her to send an email to the senior management at ICI in which she was to describe the projects and the scheme. This appears to have been intended to give the plan credibility.
[7] The scheme had involved acquiring money for the defendant through ICI from every possible source but paying as few payables as possible. It included the sale of a house by the defendant being built by ICI, and transfer of the proceeds to ICI before it was actually finished. It also included a loan from Acorn Partners (“Acorn”) to ICI even though Acorn had been clear that the loan amount was not to go to Lebanon/Syria because of U.S. banking restrictions. Also included were ‘factored’ amounts from invoices that should have been paid to suppliers and subcontractors, but were not. These included payments from an intentional underbid in August that had ensured the contract would go to ICI even though there was never going to be enough money to pay the suppliers and sub-trades. In the result, a total of $1.7 million was sent to a bank account in the defendant’s name in Lebanon. None of it ever returned or was recovered.
FINAL DAYS
[8] In order to free up the planned $2 million to send to Lebanon- Syria, ICI had taken and kept significant amounts from Acorn under a ‘factoring scheme’. These payments should have gone to the subcontractors. Acorn had also loaned the defendant $500,000.00 (repayable with interest of $7,000.00 by January 8, 2008) on the understanding the money would not leave Canada. A post-dated cheque from ICI dated January 8, 2008 for the principal and interest had been given to Acorn on the instructions of the defendant. A push was on to sell a house that had been built by ICI even though it was not complete. The sale proceeds became part of the assembled cash. The total of $1.7 million was finally assembled and forwarded through the Caisse Populaire to a bank account in Lebanon in the defendant’s own name on December 19, and 21, 2007. Meanwhile, unbeknownst to the senior management, creditors, insurers or lenders, the defendant had prepared and signed with Mr Dagenais the sale agreement of ICI. According to the document, the sale had closed the previous week. While it was clearly a sham, it also made the matching funds scheme a sham, and a fraud.
[9] The defendant had purchased two luxury SUV’s from Surgenor’s for shipment to Lebanon, but with cheques written against ICI post-dated to January, 2008 in the amount of $68,254.72, and $75,518.00, when the defendant had said he would have his banking straightened out. He had told Surgenor’s the vehicles were for a new company in Lebanon, and that he was in the process of changing banks.
[10] The defendant had told two of the senior managers that they would have to travel to Lebanon in early January for the project. They were given an itinerary, but no tickets ever materialized. He had told the senior staff at ICI, except for Mr Dagenais, that he was travelling to Florida with his children, and that he would return January 2, 2008. He had telephoned and told them he was delaying his date of return.
[11] On December 27, 2007, Mr Ghadban discovered that all files had been deleted from the defendant’s computer. He called Ms McLaughlin. Ms McLaughlin went into the ICI offices, and checked the server. It too had been deleted. Initially they thought it was a virus. Ms McLaughlin was later able to reconstruct several emails and became concerned. She was still of the belief that the defendant was returning to Canada, although she learned from reading the emails that he was in Lebanon, not Florida, as they had been made to understand. In the meantime, the defendant telephoned Mr Ghadban to confirm that his trip to Lebanon was still on for January 11, 2008. The defendant had a conference call with the three senior managers on December 29 to tell them how the funds would be sent back to Ottawa. He then sent an email to Mr Ghadban saying the money may be delayed since it would have to return through New York on its way back to Ottawa.
[12] It was later learned that funds were not actually transferred to the Lebanon Bank until December 30, 2007
[13] Then on January 7, 2008 the defendant telephoned Mr Ghadban and told him that neither he nor the money were returning to Canada.
[14] The losses arising from the defendant’s failure to return the $1.7 million, and his failure to ensure there were sufficient funds in Ottawa to pay ICI’s various liabilities amounted to some $3.8 million.
RISE AND FALL OF ICI (6364144 Canada Inc.)
[15] The defendant formed 6364144 Canada Inc. operating as ICI Construction Management, a general contracting firm in early 2006. He was the controlling and directing mind even though his wife was and remained the sole shareholder. The defendant had previously been a bankrupt. The witnesses were virtually unanimous that the defendant was extremely personable, good at marketing, and that he generated enormous loyalty amongst those he worked with. Many considered themselves close friends. Over the course of the following eighteen months he assembled a highly professional group of managers; two project managers, a superintendent, and an estimator. He also hired a bookkeeper/comptroller. Mr Dagenais as bookkeeper/comptroller was an interesting choice since he had no experience in the construction field, limited experience with financial statements, and no experience maintaining books of account. However, he did have experience with the Caisse Populaire Desjardins, the defendant’s and ICI’s banker. Mr Dagenais’ notable characteristic was his unqualified admiration for the defendant. He was described as wanting to be just like the defendant. Mr Dagenais became the defendant’s confidante for his financial matters even though he had limited experience. The defendant had significantly increased his salary from his Caisse days, and had given him a car. He encouraged Mr Dagenais to buy a lot and build a house while sharing ICI resources and contacts. Mr Dagenais was understandably loyal and unwavering in his duty to the defendant. He had been told to keep all financial matters confidential, and he did.
[16] From April, 2006 onwards, the ICI financial statements were never sent out without the defendant seeing them. The defendant’s instructions to Mr Dagenais were that the company must always show a profit. Mr Dagenais would go over the statements before they were sent out, and the defendant would make changes to ensure they showed a profit. In fact, the company seldom if ever made money. The statements fraudulently showed a profit by failing to show all payables. When an outside or accounting firm looked at ICI’s books, the deleted payables were not seen since they were kept in a separate manual file. The defendant knew that. Loans arranged by the defendant to ICI were falsely shown, on his instructions, to be shareholder loans, thereby distorting its financial picture. From time to time the defendant instructed that personal liabilities such as visa bills for his wife’s parents, and his own child support payments be paid out of ICI under a false company expense description. As the company increased its business and projects, its need for an improved cash-flow increased. The defendant arranged for a ‘factoring’ of invoices with Acorn Partners, which meant that when the invoice was approved for payment by the owner, Acorn would pay ICI a percentage of the invoice, and the owner of the project would then pay Acorn directly. The cost to ICI of receiving payment some 30 to 45 days before payment by the owner was quite high. In addition, it was always a condition of the payment that the subcontractors be paid immediately under the ‘pay when paid’ principle. That seldom happened; and after mid-November, 2007 it never happened. While ICI’s creditors and insurers thought ICI was doing well throughout 2007, the poor financial health became a concern to the senior managers. Contractors and suppliers were pressing for payment, and were threatening to abandon ICI. That concerned Ms McLaughlin and Mr Ghadban since having happy contractors were essential to them doing their jobs. It was particularly essential for Mr Ghadban who needed contractors and suppliers to give him prices for the many bids he was constantly preparing in order to possibly win a contract.
[17] The senior managers continuously made the defendant aware of the cash flow problems. In particular, Ms McLaughlin had commented to the defendant that the number of projects was decreasing, expensive cars were being leased, and there were too many staff. The defendant told her not to worry and that everything would work out. Liens by contractors began to appear in September, 2007. By mid-October, Mr Dagenais said he had been getting 25 to 50 telephone calls per day from contractors looking for cheques.
[18] About the same time, the defendant approached Mr Dagenais to ask if it would be possible to show a deposit into the company of $350,000.00 without there actually being a deposit. The bonding company had expressed some concern about the low shareholder equity and asked the defendant for an injection of $350,000.00 of equity. Mr Dagenais told the defendant he could make a false deposit of $350,000.00 into the company, and then correct it the next day. But in the meantime, the deposit slip could be sent to the bonding company. Mr Dagenais could not remember whether it was him or the defendant that did it. The statements showed the fraudulent $350,000.00 deposit on October 10, 2007, and the corrected deposit of $3,500.00 the following day. The bonding company, Trisura, confirmed they had received the fraudulent deposit slip showing that $350,000.00 had been deposited into ICI.
[19] By December 21, 2007 there was approximately $25,000.00 left in ICI’s bank accounts as against almost $2 million in payables and financial obligations due in the New Year.
[20] When Mr McCart, the trustee in bankruptcy later contacted the defendant in Lebanon in January 2008 for his comments in preparation for the first creditors’ meeting, the defendant told him that he had sold ICI in mid-December, had no further interest in the company, and had nothing to say. That sale and the defendant’s comment to Mr McCart that it was a valid sale was the single most important indication that the defendant had never intended to return to Ottawa with the money. The defendant later repeated the same fiction in an interview with an Ottawa business publication. The sale was a complete fiction and the sale document a fraud.
[21] The losses arising from the defendant’s failure to return the money to Canada amounted to approximately $3.8 million.
[22] ICI was a sham from early 2007 until its demise. While the defendant promoted ICI as a successful and growing company, it was not. It had never been a successful company. It had become the defendant’s personal ATM machine (according to a witness who had at the time declined to loan ICI money) while he supported an unsupportable and inflated life style, defrauded CRA with personal expenses paid as business expenses, defrauded his creditors with phony financial statements, and perpetrated a fraud by taking $1.7 million which were trust funds belonging to the subcontractors and suppliers out of Canada and beyond their reach. In doing so he breached his sworn and statutory undertakings to pay the subcontractors and suppliers from the payments received by ICI. These payments never belonged to ICI or the defendant. They were trust monies that belonged to the trades and suppliers. The scheme that the defendant introduced in November 2007 was just that. There was no more money and ICI was insolvent. The only way the defendant could continue his lifestyle was to take the expensive vehicles to Lebanon after leaving cheques with Surgenor’s but no funds to pay them, and $1.7 million to a country where he was able to live with impunity. The defendant’s final comment in January 2008 to the trustee in bankruptcy that he had sold the company and had no interest in the bankruptcy was a lie and further evidence of the defendant’s fraudulent conduct.
[23] In a faxed note for ICI’s bonding company later in January 2008, the defendant further confirmed he had no intention of returning to Canada, and threatened the bonding company against taking legal proceedings against him in Lebanon.
[24] The evidence included 22 witnesses and almost 100 exhibits containing many thousands of pages during 36 days of trial that lasted 11 months. The exhibits included agreed statements of fact, volumes of financial and banking records, financial statements, emails, and other documentation. The defendant did not call evidence.
[25] I found the evidence of all of the witnesses credible; and I accept their account of the losses they sustained as a result of the defendant’s conduct.
Findings with Respect to Each of the Ten Counts facing the Defendant.
Count 1: THAT THE SAID Roland Eid, between April 21, 2005, and January 5, 2009, both dates inclusive, in the City of Ottawa and elsewhere in the Province of Ontario and elsewhere in Canada, and elsewhere in Lebanon, did by deceit, falsehood or other fraudulent means defraud creditors of 6364144 Canada Inc., operating as ICI Construction Management, and other persons of property, money, or valuable security having a value in excess of $5,000, contrary to section 380(1) of the Criminal Code, and did thereby commit an offence pursuant to section 380(1) (a) of that Code;
I find the defendant guilty.
Count 2: AND FURTHER THAT Roland Eid, between April 21, 2005, and January 5, 2009, both dates inclusive, in the City of Ottawa and elsewhere in the Province of Ontario and elsewhere in Canada, and elsewhere in Lebanon, did by means of a false pretence or fraud obtain credit contrary to section 362(1) (b) of the Criminal Code, and did thereby commit an offence pursuant to section 362 (3) of that Code;
I find the defendant guilty.
Count 3: AND FURTHER THAT Roland Eid, between April 21, 2005, and January 5, 2009, both dates inclusive, in the City of Ottawa and elsewhere in the Province of Ontario and elsewhere in Canada, and elsewhere in Lebanon, did by means of a false pretence cause a person to execute, make, accept, or endorse a valuable security contrary to section 363(1) (a) of the Criminal Code, and did thereby commit an offence pursuant to section 363 of that Code;
I find the defendant guilty.
Count 4: AND FURTHER THAT Roland Eid, between April 21, 2005, and January 5, 2009, both dates inclusive, in the City of Ottawa, and elsewhere in the Province of Ontario, and elsewhere in Canada, and elsewhere in Lebanon, made fraudulent disposition of the property of 6364144 Canada Inc., operating as ICI Construction Management, a declared bankrupt as of January 30, 2008, contrary to section 198(1) (a) of the Bankruptcy and Insolvency Act, and did thereby commit an offence pursuant to section 198(1) of that Act;
I find the defendant guilty.
Count 5: AND FURTHER THAT Roland Eid, after or within one year immediately preceding January 30, 2008, in the City of Ottawa, and elsewhere in the Province of Ontario, and elsewhere in Canada, and elsewhere in Lebanon, obtained credit and or property by false representations as to the financial position of 6364144 Canada Inc., operating as ICI Construction Management, declared bankrupt on January 30, 2008, contrary to Section 198(l)(e) of the Bankruptcy and Insolvency Act; and did thereby commit an offence pursuant to section 198(1) of that Act;
I find the defendant guilty.
Count 6: AND FURTHER THAT Roland Eid, after or within one year immediately preceding January 30, 2008, in the City of Ottawa and elsewhere in the Province of Ontario and elsewhere in Canada and elsewhere in Lebanon, fraudulently concealed or removed property of a value of fifty dollars or more or any debt due to or from 6364144 Canada Inc., operating as ICI Construction Management, declared bankrupt on January 30, 2008, contrary to Section 198(l)(f) of the Bankruptcy and Insolvency Act, and did thereby commit an offence pursuant to section 198(1) of that Act;
I find the defendant guilty.
Count 7: AND FURTHER THAT Roland Eid, between November 1, 2007 and January 5, 2009, both dates inclusive, in the City of Ottawa and elsewhere in the Province of Ontario and elsewhere in Canada, and elsewhere in Lebanon, did use, transfer the possession of, send, deliver, transmit, and/or dispose of property with intent to conceal or convert that property knowing or believing that all or part of the property was obtained as a result of the commission in Canada of a designated offence as defined by the Criminal Code, contrary to section 462.31 (l)(a) of the Criminal Code, and did thereby commit an offence pursuant to section 462.31(2) of that Code;
I find the defendant guilty.
Count 8: AND FURTHER THAT Roland Eid, between April 21, 2005, and January 5, 2009, both dates inclusive, in the City of Ottawa and elsewhere in the Province of Ontario and elsewhere in Canada, and elsewhere in Lebanon, did by deceit, falsehood or other fraudulent means defraud 6364144 Canada Inc., operating as ICI Construction Management of property, money, or valuable security having a value in excess of $5,000, contrary to Section 380(1) of the Criminal Code and did thereby commit an offence pursuant to section 380(1) (a) of that Code;
I find the defendant guilty.
Count 9: AND FURTHER THAT Roland Eid, between April 21, 2006, and January 5, 2009, both dates inclusive, in the City of Ottawa and elsewhere in the Province of Ontario and elsewhere in Canada, and elsewhere in Lebanon, did, knowing them to be false, make false documents in relation to 6364144 Canada Inc., operating as ICI Construction Management, with the intent that they be acted on as genuine, contrary to section 366 (1)(b) of the Criminal Code and did thereby commit an offence pursuant to section 367 of that Code;
I find the defendant guilty.
Count 10: AND FURTHER THAT Roland Eid, between April 21, 2006, and January 5, 2009, both dates inclusive, in the City of Ottawa and elsewhere in the Province of Ontario and elsewhere in Canada, and elsewhere in Lebanon, did, knowing that documents in relation to 6364144 Canada Inc., operating as ICI Construction Management, were forged, caused or attempted to cause persons to use, deal with or act on those documents as if they were genuine, contrary to section 368 (1)(b) of the Criminal Code and did thereby commit an offence pursuant to section 368(1)(c) of that Code;
I find the defendant guilty.
[26] I expect counsel will want to make submissions concerning the application of the Kienapple principle to these findings. I can either hear submissions now if counsel are ready, or we can adjourn to a convenient date.
EVIDENCE
[27] The parties agreed at the conclusion of the trial that the evidence called during a voir dire, but not a statement made by the defendant dated June 20, 2012, be part of the evidence. That evidence is as follows.
[28] The defendant was arrested June 20, 2012 at 14.45 outside his apartment door and was taken to the police station for fingerprinting, photographs, and was questioned. He was cautioned at the time of his arrest, and was later given an opportunity to speak to counsel. He gave a three-hour video recorded statement. The defendant’s wife was arrested shortly after the defendant. She arranged for her sister to come to take care of their two young children. She was cautioned, spoke to counsel, and declined to give a statement. Both the defendant and his wife were kept in cells overnight but were not permitted to speak to each other after their arrest.
[29] RCMP S/Sgt. Vail said she assisted with the arrests on June 20, 2012 and took instructions at the time from RCMP officers Roberge and Arbour. She said that that the defendants apartment building on Riverside Drive had been under surveillance, they had been looking for the defendant; and they intended to arrest the defendant and his wife as soon as arrest warrants – which were in progress - had been obtained. When she received telephone advice that the warrants had been obtained, she said she instructed that the defendant be arrested at his apartment. S/Sgt. Vail said that she was waiting outside the apartment building in a vehicle and saw the defendant with two officers. She also saw the defendant’s wife without handcuffs with an officer. She approached the defendant’s wife and arranged for her sister to meet them to take charge of their two children. She had no recollection of what any of the parties said. Then she went up to the apartment with the defendant’s wife to get her own medications and a lawyer’s business card. S/Sgt. Vail said she gave her an opportunity to step back and telephone her lawyer – which she did. After taking the defendant’s wife to the police station she said she gave the lawyers business card to the defendant – and gave the medications list to the jail guards.
[30] S/Sgt. Vail said the defendant’s wife telephoned her sister to bring the defendant’s medications. She arrived about an hour later. S/Sgt. Vail identified a list of medications in the ‘prisoners report’ with a note – “take medication”.
[31] RCMP Corporal Corz Goodgi described himself as a member of the surveillance team on June 20, 2012. He had no previous involvement. He was tasked to find the defendant to arrest him after being instructed that the arrest warrant had been obtained. He said that he and RCMP Corporal Dalpe, who were both in civilian dress, went to the lobby of the apartment building, buzzed the defendant’s apartment, asked for the defendant who identified himself through the intercom; and who buzzed the two officers up to his apartment. The defendant was waiting for them outside his apartment door. Corporal Goodgi said he identified himself and told the defendant he was under arrest for fraud. He said the defendant said nothing. He conducted a pat down search of the defendant then took him down to the lobby. He could not remember if the defendant was handcuffed. When they were in the lobby, Corporal Goodgi again told the defendant he was under arrest for fraud. He said the defendant said “...and a lot more than that”. He said the defendant was then cautioned and given his rights to counsel. The defendant told him his wife had the lawyer’s number and would be calling the lawyer. Corporal Goodgi said he didn’t recall seeing the defendant’s wife. He then turned the defendant over to a uniformed officer for transport to the police station. He said the defendant was cooperative throughout.
[32] RCMP Corporal Dalpe was on surveillance on June 20, 2012, following the defendant’s wife and hoping to locate the defendant. This had been the sixth day of surveillance. He said that early in the afternoon, he had been told that the defendant was in his apartment, to see if he was there; and if so, to arrest him. Along with Corporal Goodgi, he went to the apartment building, buzzed the apartment, spoke to the defendant who identified himself, then buzzed the two officers up to his apartment. He said that the defendant was standing outside his apartment door, and when he showed the defendant his badge, the defendant said “I was expecting you guys” – and smirked or smiled. He said he took from that remark that the defendant had been waiting for them. He said the defendant was cooperative and calm; and went back into his apartment to get his wallet. He said they then took the defendant downstairs where a uniformed officer and marked car was just arriving.
[33] RCMP S/Sgt Arbour said that he was essentially the manager of ‘project academic’ which involved the defendant, and he received regular briefings from Sgt Roberge. The investigation had been ongoing since about 2008; and they had wanted to arrest the defendant who was in Lebanon. When he learned the defendant had returned to Canada they decided to arrest him. He said that on the morning of June 20, 2012, Sgt Roberge briefed him that they intended to get an arrest warrant for fraud and bankruptcy offences for the defendant that day. He was also told of the plan to arrest the defendant’s wife. He said he attended along with Sgt Roberge at the Courthouse in Ottawa to get the warrants of arrest. Later he was informed that the defendant and his wife were both in custody at the police station. He said he was present in the reception area of the police station when the defendant was brought in and spoke to him. S/Sgt Arbour said he asked the defendant if he wanted to speak to a lawyer. The defendant said that his wife had the phone number. S/Sgt Arbour said he told him about the charges and then cautioned him with his right to silence. He said he told the defendant that his wife was on her way to the police station and that he would get the phone number from her and give it to him.
[34] He said he then completed the ‘prisoners report’ that included his note – “take medications” followed by an asterisk. The medications (9) were listed and stated the defendant was diabetic and bipolar. He said he had obtained the list from the defendant’s wife. He also identified in the ‘prisoner report’ various entries of the times and the medications that had been taken. He said that some of the entries had been made by him.
[35] After 5 hours of questioning, the defendant said he was tired and needed to go to his cell. During the questioning, the defendant acknowledged that in answering the questions put to him he was not following his lawyer’s advice. The defendant asked for his medications and for water during the questioning. All of which were made available immediately. Sgt. Roberge said she had been unaware of what medical conditions the defendant suffered from.
[36] At the conclusion of Sgt Roberge’s evidence, but before cross-examination, Mr Adelman rose and said that he was admitting the voluntariness of the statement. As a consequence, Sgt Roberge was not cross-examined, the Crown failed to call any additional evidence, and the defendant was not invited to call any evidence on the voir dire. On the basis of the defendant’s admission, I held the statement was voluntary and was admissible. On Monday, April 13, 2015, on the day the trial was to commence, the defence rose to object that his agreement to the voluntariness of the statement had been premised on the Crown’s undertaking to put the statement in as part of the Crown’s case; and that the day after the voir dire concluded, he had been advised by the Crown that he had changed his mind. He would not be making the statement part of his case. The Crown candidly agreed that he had told the defence it was intention to make the statement part of his case, but that the evening after the voir dire he had changed his mind. The defendant sought an order that I compel the Crown to make the statement part of its case. I ruled that the Crown prerogative should not be interfered with under these circumstances, and I declined to order the Crown to make the statement part of its case. I did however strike the defendant’s admission of the statement, and ordered that the voir dire continue. Availability of witnesses required that the voir dire continue on a later date. Since the defendant had been arraigned on the morning of April 13, the trial commenced with the understanding that it would be interrupted at a later date in order to continue the voir dire.
[37] The voir dire resumed and the cross-examination of Sgt Roberge was completed. The Crown closed its case on the voir dire. The defendant had called the defendant’s physician, but then decided not to call any evidence and admitted the voluntariness of the defendant’s statement. In view of the defendant’s position, and the evidence I had heard, I admitted the statement as being voluntary. The statement was never introduced into evidence either by the Crown or the defendant however.
[38] The defendant was arraigned on eleven counts to which he pleaded not guilty. The Crown withdrew Count #11.
[39] Kevin McCart was the Trustee in Bankruptcy of 6364144 Canada Inc. operating as ICI Construction Management (‘ICI’), but became involved on behalf of ICI’s banker, and secured creditor, Caisse Populaire (‘Caisse’) when it retained him to investigate the financial affairs of ICI and to preserve all of its assets. Mr McCart has been a Trustee in Bankruptcy for 10 years. He said he was contacted by Richard Poirier of the Caisse on January 11, 2008, and asked to accept a retainer to protect and preserve the assets of ICI by reason of information he had received that ICI had been abandoned by its principal who had left for Lebanon. He said he was told that ICI had become dormant, and several assets including a substantial sum of money had been sent to Lebanon. He was also told that employees of ICI had dropped off the keys for the ICI premises. That same day, Mr McCart went to the ICI offices on Algoma Avenue, Ottawa, where he met Mr Poirier. Ed Chasse of Trisura Insurance, ICI’s bonding company, was there boxing up documents. There was a lot of activity. Mr McCart said he tried to limit the documents being taken, and later recovered many of the documents and files (computers) that had been removed. He disconnected ICI from the internet so as to prevent access, and took steps to secure any vehicles. He said he learned that the employees had not been paid since December 21, 2007 (with 2-4 weeks of payroll due), and that ICI was not functioning. He discovered a BMW on the premises; and a Lexus, Land Rover, and Buick on premises on Blackstone Crescent which he secured and removed the following day. In evidence he identified ICI lease agreements concerning each of the vehicles.
[40] The next day, Mr McCart drove to NDMC to look at an adjacent building that he described as an ATCO type but very large trailer attached to the NDMC building. On January 14, 2008, he said he had learned from Surgenor’s that 2 vehicles had been shipped to Lebanon, having been paid for with ICI funds. He said he also had discussions with Sebastien Dagenais, a company employee and learned that ICI owed $245,000 for unpaid ‘at source’ deductions, that $1.7 million of company funds had been transferred to the defendant in Lebanon, and that only about $35,000 in accounts receivable were on ICI books since all other accounts receivable had been assigned to Acorn Partners. Mr McCart said he notified the Caisse that as a result of his review he concluded that CRA’s claims would take priority and there was nothing likely recoverable for the Caisse. Further, he said he had discussions with a solicitor, Ron Price, that $1,000,000.00 was due to ICI for a project that had been substantially completed at the L.B. Pearson Building- but then he learned that the Federal Government had claimed a set-off against the $1,000,000 for claims against ICI on other projects. Mr McCart learned that Acorn Partners, who had been financing the accounts receivable in the sense of paying ICI for their accounts receivable, had already advanced to ICI $1.2 million for two projects for the Federal Government – including the L.B. Pearson Building project.
[41] Over the next several days, Mr McCart met with various creditors and their representatives as well as employees of ICI. With the assistance of the employees, he reviewed documents and records that were available while noting that there were no banking records. He said he understood the owners to be the defendant and his wife as noted in the public corporate filings; and that they were in Lebanon – unavailable to assist him in reviewing ICI records. He also learned that two vehicles had been purchased from Surgenor’s with ICI funds and shipped to the defendant in Lebanon. He then entered into an agreement with CRA, when he saw there were no funds, to pay his fees for his continuing work. He had concluded it was likely CRA that would be the beneficiary of any found assets because of its priority over all other creditors. Finally, January 30, 2008 he obtained on behalf of the Caisse an order placing ICI in bankruptcy. He explained that as Trustee he had broader powers and authority under the Bankruptcy Act to deal with ICI.
[42] At about the same time, Mr McCart became aware of a signed Agreement of Purchase Sale purporting to sell all of the shares of ICI to Mr Dagenais, ICI’s controller. The agreement was dated November 30, 2007. Mr Dagenais told Mr McCart that he couldn’t explain why he signed the agreement because he in fact did not buy ICI; and further that it was his understanding it was for the purpose of creating another company. The purchase price was $6 million. Mr McCart said he was sceptical of the legitimacy of the agreement because ICI seemed to be insolvent. There were nominal accounts receivable, large debts, and no assets. In addition, having spoken to Mr Dagenais, it seemed unlikely he had the wherewithal to manage the purchase price. The agreement also had the wrong company name. Mr McCart treated the agreement as ineffective and unenforceable for the purpose of administering the bankruptcy estate. Later in mid-February, in answer to an email to the defendant making a standard request for information from an owner, he said he received an email from the defendant in Lebanon saying that he didn’t own ICI, that the sale had closed December 15, 2017, and that he had no involvement in the affairs of ICI. The defendant declined to assist Mr McCart.
[43] Following meetings with the secured creditors, the bonding company (Trisura), Acorn, and the Caisse; and having received from CRA a Notice of Assessment showing arrears owing under ICI’s payroll account of $281,197.75, and GST of $790,512.69 he felt obliged to request an investigation by the Superintendent of Bankruptcy. In or about the same time he found out that Surgenor’s had tracked down the two vehicles. It had not been paid for the vehicles and had recovered them. February 27, 2008, Mr McCart wrote to the Superintendent of Bankruptcy requesting a police investigation and listed his many concerns.
[44] Mr McCart presented his Statement of Affairs to the first meeting of creditors. It showed ‘NIL’ assets; and admitted claims of $6.42 million out of $9.758 million claimed. His later investigations determined that the $1 million from the L.B. Pearson Building project was in fact $900,000, but that the Federal Government was claiming a set-off for amounts owed to CRA. The Bankruptcy was all but completed.
[45] In cross-examination, McCart agreed that on January 11, 2008, he had spent some 7½ hours on the file with most of it at ICI premises. He confirmed his information that the Caisse had told him it had earlier received a call from company employees on the advice of their lawyer, Ron Price. He confirmed that when he got to the premises there were other people there including Ed Chasse from Trisura who he later learned had in the days previously already removed 6 to 8 boxes of documents. He confirmed that while he requested and received the return of boxes from Trisura, that he had no idea if all of the boxes had in fact been returned.
[46] As agent for the Caisse, he locked up the offices on January 11, 2008. He confirmed that there had been no activity in the Caisse account as at the end of December, 2007, and said that cheques were being dishonoured but no deposits were being made. He said that Mr Dagenais, the comptroller was more of a book keeper; and the books and financial records were either incomplete or disorganized. He could not find any banking records of the kind that he would have expected to find in the accounting area. He said he was unaware of deposits to ICI account in 2007 in the amount of $50,000.
[47] Mr McCart confirmed that Mr Chasse had expressed concerns to him about the truthfulness of Mr Dagenais.
[48] Mr McCart said that the speed of the bankruptcy between January 11 and January 30, 2008 was not out of the ordinary; and sometimes it occurs in 24 hours. He confirmed that it was the Caisse that initiated bankruptcy proceedings against ICI; and confirmed that part of the motivation was the cheque to the defendant in Lebanon for $1.7 million, as well as the overdue interest payment owing to the Caisse for which it called the underlying loan on January 15, 2008. He said he understood that Acorn and the Caisse had been in litigation since, but believed that Trisura did not get anything. He said he was unaware of Trisura having received a settlement cheque in 2012 from the Caisse for $115,210.72.
[49] He said that Mr Dagenais was clear with him, that he had no intention of continuing ICI; and there was no one else. Mr McCart confirmed there were a number of projects under way at the time including the Shirley’s Bay project. He confirmed that if called on, that Trisura as the bonding company could have cut its losses and finished the projects.
[50] Mr McCart said he found out about the ‘ICI sale agreement’ late in January but that Mr Dagenais never told him about it. In fact when he asked Mr Dagenais about the agreement, he said the agreement was supposed to have been destroyed. Under questioning about what he had told the police, Mr McCart confirmed that he believed ICI had had some success in the past but denied that it was a successful company. He said there was no chance that the $1.7 million from ICI to the defendant was for the purchase of ICI. While he had no notes of his conversation with Tanya McLachlan, he said he would have asked her about the sale – and she would have told him it was a ‘ruse’. Mr McCart said that Mr Dagenais would not have had the authority on his own to ‘factor invoices’ (to Acorn). He said that while he was aware that Acorn had loaned $500,000 to ICI to replace a line of credit from the Caisse, he was unaware of a $500,000 loan from Acorn which it was suggested to him formed part of the $1.7 million cheque to the defendant. He confirmed that he had no idea how the $900,000 owing from the L.B. Pearson project had been finally resolved. He said that while the Small Business Loan scheme would cover 85% of its losses, that that would not occur until after it had exhausted its remedies against ICI and the bankruptcy – hence it would not show up as a calculation before its claim in the bankruptcy. Mr McCart said he knew nothing about any medical condition of the defendant.
[51] The defendant`s former wife, Selena Eid, said they were married from 1992 until approximately 2003 when they divorced. She had 2 children with the defendant. She described the defendant as sometimes impulsive, and with a close relationship with his father. She said he was not religious. She said that up until his departure for Lebanon in December 2007, he had been paying her monthly support of $3,200.00. In the late fall of 2007, he gave her a cheque in the amount of $100,000 which he asked that she not cash until January, 2008. She said this was for support and just because he wanted to give it to her. The defendant told her he wanted to take the children to Disney World, and obtained her signed permission. The children phoned her later and told her they were having a good time in Disney World. Then, on the day the defendant was supposed to return with the children, he phoned her to say that he was not returning. She said she called the police, but did not pursue the laying of kidnapping charges. He sent the children back to Ottawa at the end of January. In fact she has permitted the children to visit the defendant in Lebanon every year after that.
[52] Tania McLaughlin was Project Manager of ICI. She said that in the morning of January 8, 2008, she had believed ICI was functioning. But by the afternoon when she learned all money had been taken out of ICI’s bank accounts, she realized it was not functioning. She later came across a handwritten note, dated January 17, 2008 that had been faxed to ‘Terry and Frank’ (of Masters Insurance Brokers) which she identified as being in the defendant’s handwriting. In part it read:
“I know you wouldn’t understand why I did what I did….. Terry, I would like you to tell Janette (sic) on my behalf that first you (Terry) had no idea what I was doing. Second, inform her to tell her bosses at Trisura not to be stupid enough to start taking legal action against me, especially in Lebanon or the middle east, because trisura is tied back to the Bronffman’s (sic) family (Jewish money (hint), and no lawyer in the entire middle east is stuppid (sic) enough to accept this case, I or Marlene will never go back to Canada so tell them to save their money…….”
[53] Ms McLaughlin said that she started with ICI in March, 2006 at its offices on Startop Rd. (shared with Southgate Carpets). At that time there were four employees and it was a general contracting firm, although, it was essentially a drywall business. The defendant was very hands on and was at the office on a regular basis. She said she had known the defendant when they had worked together at Westeinde Construction where he had been project manager for small projects and she was project coordinator. She described the defendant as a mentor and a friend. She had been working in the construction business for some 15 years. From the offices on Startop Rd, ICI quickly evolved and moved into very large well fitted up offices on Algoma Avenue in September, 2006.
[54] ICI rapidly increased its book of work and at its height in the spring of 2007, it had 15 employees. In 2006 the value of work was approximately $200,000 and by 2007 the projects had to gone to $2 million and then $4 million. Ms McLaughlin said that she (senior project manager), Mr Ghadban (estimator), and Mr Dagenais (accounting) were the key management people in the office - with the defendant as CEO. Mr Foote was the field project manager- outside- and the same level as her. Ms McLaughlin said that by June, 2007 the defendant had become less available. Up until then he was very interested and was present. By September, 2007 he was noticeably absent. After that ICI was being run primarily by Mr Foote, Mr Dagenais and herself. In cross-examination she said that after September, the defendant’s attendance was hit and miss – sporadic attendance. She said he was away about 10 days every three months, and she understood that his travelling was to Lebanon.
[55] She said her job was to oversee all of the projects – except the house that was being built by ICI. The key management people would have meetings regularly, and tried to have them every Friday afternoon in order to identify the status of projects, the payment of sub-trades and receivables. The billings went out the 25th of each month based on the proposed work timetable.
[56] Ms McLaughlin said that the file would start with her when it was apparent that ICI was going to get the job. She would get the file from the estimators which would include the estimates, the names of the lowest sub-trades with a dollar value for each broken down by area of work or division. Assuming the lowest trade was complaint free- otherwise acceptable- she would prepare the contracts for each of the subcontractors and have them signed. She identified a typical list for each of the ongoing projects at the time: Silver Springs, RCMP TPOF, Shirley’s Bay, and L.B. Pearson. Ms McLaughlin also explained with reference to the Shirley’s Bay project that the monthly billings would be the percentage or value of the contract performed each month. This would be determined in consultation with Mr Foote who would know what work had been and would be done from his onsite work. She expected that ICI would be paid by the owner in 30 to 45 days after the billing, and the sub-trades would be paid from that payment. She identified an invoice for the project dated November 30, 2007 in the amount of $808,701.81. A further billing dated December 21, 2007 in the amount of $235,322.74 was sent out. She said she didn’t believe that any of the sub-contractors were paid from these latter billing. The process of billing required that ICI provide a statutory declaration each month stipulating the amount if any that was outstanding and to be paid from a billing to sub-contractors. Ms McLaughlin identified a series of statutory declarations form October 17, 2007 through December 20, 2007 showing that November 19, December 5 and December 20, 2007 there had been nothing owing to the sub-contractors. It was the practice for ICI to assign or factor billings to Acorn as soon as they were sent, so that ICI would get paid by Acorn immediately, and not have to wait the 30 to 45 days. It was Acorn’s practice through their Mr Chen to pay ICI only after the owner had confirmed it would pay the account. This process required daily contact with Acorn.
[57] Meeting Minutes from July 30, 2007 noted the defendant saying that the staff need not worry about financial concerns since that was his responsibility. A bounced cheque, October 25, 2007 from ICI for a building permit caused a flap between Acorn and the client, Public Works, for the Shirley’s Bay project. It was solved by Acorn forwarding a certified cheque. An email dated October 26, 2007, showed Acorn pressing ICI for payment by Public Works, and sub-trades pressing for payment. An email chain from November 9 through November 13, 2007 in a similar vein was identified by Ms McLaughlin as trying to accelerate payment by Public Works. November 23, 2007, an email from Public Works to Ms McLaughlin raised the non-payment of sub-trades in the amount of $136,297.26 in the statutory declaration as delaying payment. Ms McLaughlin said that at the time she was under pressure from the defendant and from Mr Chen of Acorn to get money in. December 18, 2007, Public Works confirmed payment coming of $804,673.00 on the Shirley’s Bay project. She identified an email chain concerning Silver Springs dated December 20 and 21, 2007 pressing the architect for the completion certificate in order to accelerate the process to get paid. She identified a further email chain, dated December 20, 2007 in which she was attempting to get approval for a delay claim. She said approval would permit Acorn to factor the account so that ICI would be paid. She said she was under increasing pressure to get as much money into ICI before Christmas.
[58] Ms McLaughlin identified an ‘Acorn Partners’ listing dated December 21, 2007 showing the status of what had been paid by Acorn and on what projects. By this time, the subcontractors were being paid more than 60 days after the invoices had been factored by Acorn. The Listing showed that of $800,000 in invoices, ICI had been paid $720,000 by Acorn.
[59] Ms McLaughlin said that after January 8, 2008, she accessed ICI’s email and printed a number of emails that she turned over to the RCMP. She said she had nothing to do with the house that was referenced, but that 90% had not been finished when it was sold; and the subcontractors had not been paid from the sale proceeds. She said the house was covered under a bond.
[60] She said that while in 2006, ICI had not bounced any cheques; by the end of the summer 0f 2007 through December a lot of cheques were bouncing. She said that contractors were calling for payment, and money was not going into the accounts to pay the subcontractors or for payroll.
[61] Ms McLaughlin identified an email from the defendant dated October 31, 2007 in which he referenced a Syrian project and asking that she help him with a report. She had only seen photos that he had shown her. The defendant asked that all invoices for ICI be done by the end of December – and the money received - because the Syrian Government was going to match the money dollar for dollar in the account for the Syrian Project.
[62] October 25, 2007, the defendant instructed that named contractors on the RCMP contract be told to do the work on the house and for them to bill in January. On the Shirley’s Bay project, the defendant had instructed Ms McLaughlin to put the contract at $4.2 million even though the estimate from Mr Ghadban had the value at $4.9 million. She said this made no sense because they would lose $600,000, with no opportunity to make it up. She said that the defendant was increasingly pressuring her to get as much money into the accounts as possible because of the Syrian project. She noted that the invoices that were sent out December 21, 2007 were the last that could go out until January, and that all receivables had been factored by Acorn. She said she had been told by the defendant to get $2 million into the bank account by the end of December. Later he moved the date up to December 21.
[63] After Christmas she said she found a November 27, 2007 email from the defendant to Dallia Khalil prompting her to send him an email concerning the Syrian project, and the need for $2 million to be in the bank by the end of December. Ms McLaughlin said she had met Ms Khalil and didn’t think she knew much about construction, although she understood she spoke Arabic.
[64] She said that on December 27, 2007 she received a telephone call from Ghadban Mounir saying there were problems at work and the defendant’s computer had been wiped clean. She said she went into the office on December 28 and everything seemed ok; except she was told the bank accounts were empty. Ms McLaughlin said she found an email on the ICI server from the defendant concerning his plans to build a very extravagant house in Lebanon. She found a further email from the defendant’s wife to the defendant confirming flight details to Lebanon on December 27 – when she had been told the defendant and his family had been going to Florida. An email that she had not seen dated November 29, 2007 gave details of the Syrian Project and it’s financing. She said she did not connect this email to the November 27, 2007 email from the defendant to Ms Khalil. She also found an email dated January 4 and 5, 2008 from the defendant concerning his exit from a company agreement because of ICI’s “discontinuation of business, or incapacity of the founder of ICI, Mr Roland Eid” – and that he was living permanently with his family in Lebanon. Ms McLaughlin said she was stunned when she read the email.
[65] She identified a Public Works document entitled ‘Request for Payment’ for the month of September, 2007 concerning the L.B. Pearson Project, noting that it had been approved for payment by Public Works October 10, 2007. She also identified an interim certificate for substantial completion for the TPOF Project, showing it had been approved for payment November 6, 2007. That meant the 45 days subject to a 5% holdback had commenced. Ms McLaughlin also identified her proposed billing for the L.B. Pearson Project #3, October 31, 2007, when it was 87% complete. She also identified her Proposed Billing for the Silver Springs Project for November when it was 90% complete. This included a billing breakdown. Further, she identified an exchange with Public Works in which she was pressing for payment on the Silver Springs Project.
[66] Ms McLaughlin described the subcontractor invoice process, and said that she would only deal with the invoices for mechanical and electrical, because they needed special attention and discussion with the Public Works Consultants. They might require revision after comment from the consultants. The others went to Mr Dagenais.
[67] She identified an email from the defendant to her dated October 25, 2007, shortly after the building permit cheque had bounced, in which the defendant assured her that ICI had no money problems, and that he had everything in hand.
[68] She described receiving further information from the defendant concerning the Syrian Project, that it would be good for ICI, and that it involved sending as much money as possible to ICI’s Lebanon account before Christmas where it would be matched dollar for dollar by the Lebanese Government. The defendant explained to her that it needed to be in Lebanon, so the Syrians could see the money in the account. Then the money would be returned to ICI’s local Canadian account. The goal was $2 million. In cross-examination she said that at the time it looked like a legitimate viable enterprise, and she thought that Mr Ghadban had been working on it.
[69] She said that there always seemed to money issues, and a lot of pressure around billings. She said she raised concerns with the defendant because it seemed that subcontractors’ invoices were not being paid. She said ICI had a lot of expenses. Everyone had a car, and credit cards were at their maximum. . She also raised staffing issues with him. She said there were 21 staff but there was only one ongoing project – Shirley’s Bay. The rest had been substantially completed. She said the defendant told her not to worry about it, and that once the money came back to the ICI account with the matching Syrian money, their money problems would be solved.
[70] Besides the defendant’s instructions to have the contractors on the house that was being built, bill in January but to do the work right away, she also noted there were post-dated cheques to subcontractors for January. She recalled the defendant attempting to persuade a contractor to wait for payment until January, and if he agreed he said he would pay in full without a holdback.
[71] She said the date for the money was then moved up by the defendant to December 21, 2007 on the basis that he and his family were going to Florida. But he reassured her that the money would come back into the account at the end of December. On December 21, 2007, she was told by the defendant to be at a meeting with Acorn to receive the cheque. She, Mr Dagenais, Mr Ghadban, and the defendant all travelled together to Acorn’s offices in a company vehicle. Ms McLaughlin said she told them all that she was concerned that there was not enough in the account to cover the payroll for staff and cheques to the contractors. At the meeting, Mr Chen handed her the cheque which she passed to Mr Dagenais. They all left. She went alone to the prearranged staff Christmas lunch. Later, only Mr Ghadban joined her. ICI’s office closed on December 21, 2007 with the intention to re-open January 2, 2008.
[72] After receiving Mr Ghadban’s telephone call on December 27, 2007 saying the defendant’s computer had been wiped clean, she went to the office the following day, and found that in fact all files on the defendant’s computer had been deleted. She also found that all of his files on the ICI server had also been deleted. She said she was computer knowledgeable and started tracking and checking the defendant’s emails. She felt it did not look right. She knew the money was in Lebanon and was concerned about cheques not being cashed.
[73] On January 2, 2008, Ms McLaughlin said she spoke to the defendant on the phone. She told him of her concerns and that if the money was not back, there would be huge problems. He assured that he was returning to Ottawa, and would arrive on January 6, 2008. It was agreed that the offices would remain closed until he returned and would re-open January 7, 2008. In cross-examination, Ms McLaughlin was shown an email apparently from Mr Dagenais to Acorn asking them to factor a $50,000 cheque he expected to receive from the City for the ‘paramedic post’, and that he needed the money to pay payroll.
[74] Ms McLaughlin said that as she went through more of the emails, she saw that the defendant was in fact in Lebanon, not Florida as she had been told- and she was concerned. On January 6, she said she called his number but it went straight to voicemail.
[75] When she arrived the next day, Monday, January 7, 2008, Mr Dagenais told her that there was no money in the accounts. They met together with Mr Ghadban. She said she had no further contact with the defendant although she called him and sent emails, but got no response. Having no response from the defendant and seeing that the money was all gone, she said she called ICI’s solicitors Doucet McBride and left a message to speak to Ian McBride. She then saw an email from Doucet McBride to the defendant asking that the defendant call Doucet McBride.
[76] In cross-examination, Ms McLaughlin said they had given no thought to try to continue ICI. She said there was no money to pay contractors or payroll; and cheques to contractors had bounced.
[77] Ms McLaughlin was concerned that the defendant had not returned. The money had not returned from Lebanon, there was no money in the account, and the defendant was not responding to her calls and emails. She said she then called the lawyer Ron Price, who she knew as an experienced lawyer; and they met at 3 pm along with Mr Dagenais and Mr Ghadban. She said she wanted his advice about their individual responsibilities. She paid his fee for her advice. At that time, the Agreement of Purchase and Sale of ICI was brought up by Mr Dagenais. This was the first time she heard of the agreement. She said she thought Mr Dagenais was young and stupid for having signed it, and agreed in cross-examination that he had never explained why he had signed it. Although, in cross-examination she acknowledged that Mr Dagenais had wanted to be like the defendant. Mr Price reviewed the agreement and told them it was not a viable contract. During cross-examination, she said she recalled a previous discussion with the defendant in June of 2007 during a union shutdown of a job site; and the defendant had said that he would meet with the head of the union to get it sorted out. He later said he had solved the problem but then had suggested that they buy a portion of ICI in order to circumvent the union. Nothing further was discussed until December during one of their meetings. She said that the defendant had joked that he should sell ICI to Mr Dagenais. She said everyone laughed, and considered it was a joke.
[78] She said that as of January 7, 2008, only the Shirley’s Bay project was ongoing. . Then Ms Cote of Public Works got wind of the financial problems and closed the job site. That same day and the next, she had the receptionist fax out the various bonds. At the end of the day, she said she, Mr Dagenais, and Mr Ghadban were just sitting there in shock.
[79] The following day, January 8, a parade of sub-trades came through the office. Mr Chen of Acorn was there with a forensic accountant. On Thursday, January 10, she met with Mr Price again at between 11 am and noon. Trisura was at that meeting. Mr Price told them that Trisura had the right to go on the premises and to make copies of documents. Ed Chasse of Trisura was aggressive and confrontational with Mr Dagenais at the meeting.
[80] When Trisura went to ICI offices after the meeting with Mr Price, ‘all hell broke loose’. They started removing boxes of documents for printing and then returned the boxes. But she said she had no way of verifying if all the boxes had been returned. Ms Laughlin told everyone to take their computer or their hard drive home with them as a security measure. Terry and Frank from Masters, the insurance broker, showed up at the office, and said they heard ICI was having financial problems. During that week, she had seen a pile of paper work on the defendant’s desk, had bundled it up and given it to the Trustee. On Friday, Acorn arrived about noon in a hysterical state and announced that the Caisse was about to arrive to close the offices. Mr McCart arrived shortly after that and closed the offices. All the employees turned in their access cards- key fobs.
[81] Ms McLaughlin explained that in the first week of January, she prepared invoices for her husband a painting contractor in the amount of $46,000 and gave them to Mr Dagenais. She said it was her job to do his invoices but she had fallen behind. When she saw the state of ICI she quickly got the invoices in. She herself was paid her salary cheque December 21, 2007 which had bounced. Mr Dagenais had made her whole, but she was never paid for her December 28 period. Under cross-examination, she said she remembered also receiving $1,000 from Mr Dagenais.
[82] Ms McLaughlin said that over the next several months she was employed by the Trustee, Mr McCart, to prepare statements for ICI in order to see if there was any money to be found in any accounts. She prepared reports concerning the financial affairs and status for Silver Springs which showed that by December 21, it was 97% complete, had been billed and factored by Acorn. However the subcontractors had not been paid. The L.B.Pearson Project was completed at the end of October and had been billed. A delay claim was billed December 21. All the invoices had been factored by Acorn. The subcontractors had not been paid. The RCMP TPOF Project had been substantially completed by October 3, 2007, finally billed December 21, and was fully factored by Acorn. Subcontractors had not been paid. Her examination of the Shirley’s Bay project showed there had been 3 billings for September through November. All the billings had been factored. She had been tasked to see if there had been any change orders that had not been factored; and found there were none.
[83] Under cross-examination, Ms McLaughlin confirmed that she did not ‘adjust’ her husband’s invoices but actually prepared invoices that were due. She confirmed that the defendant had left her to do her job, and was ‘hands off on day to day operations’. On the extras for the L.B. Pearson Project, she said that in her experience she had never seen extras exceed the original contract price – as had been the case. She described and confirmed that all of the work, including the extras had been factored to Acorn. Ms McLaughlin was questioned about the Statutory Declarations and while she had had no role in their preparation, she agreed that they were just a piece of paper – and not worth the paper they are written on. She explained that the reason they are unreliable is that the Statutory Declarations that accompany a billing are sent out before the previous bill has been paid so that there will always be unpaid subcontractors from the previous billing. She reviewed the Shirley’s Bay statutory declarations, and confirmed again that she had nothing to do with their preparation. An email exchange with Ms Cote of Public Works reflected the concern of Public Works if subcontractors were not shown to have been paid. Ms McLaughlin agreed that the statutory declarations said the subcontractors had been paid- whereas they had not at the time been paid.
[84] Ms McLaughlin said that the defendant was not computer literate and in her estimation he would not know how to turn the computer on. However, she believed that the defendant had hired someone to delete the files on his computer and on the server.
[85] In cross-examination she said she knew very little about the house the defendant had been building, other than that he had sold it, and the purchaser had paid a $100,000 deposit. She said she was aware that other work had been done earlier by ICI for the purchaser’s offices, but she had no details.
[86] She agreed in cross-examination, that it had been incorrect to say that ICI had been abandoned and closed in December. When the office closed December 21, 2007, the expectation was that ICI would open on January 2, 2008. The date was moved by the defendant to January 7, but the expectation was that the work would resume January 7, until Public Works closed the Shirley’s Bay job site to ICI. Ms McLaughlin also agreed that it was not unusual for contractors to be struggling with cash flow from time to time.
[87] Carmen Arango was hired by ICI in June, 2006 and worked as a project coordinator until January, 2008. She reported to Ms McLaughlin, as project manager, and was the administrator for the various projects. This involved assembling the plans, documents, samples, and invoices. Ms Arango said beginning in the first quarter of 2007 the invoices she prepared were for payment to Acorn. She also dealt with Julia in accounting and Lionel, the site superintendent. She prepared the contracts for the various sub-trades using a template that had been in use by ICI. She based the contract amounts and specs on the quotations received from them. It included a section acknowledging that the sub-trades would be paid as soon as the contractor was paid. Later in her employment, another project coordinator was hired, and he became her assistant. She said she attended the weekly meetings as well as the site meetings from time to time. She seldom dealt directly with the defendant. Under cross-examination she said she was not aware that Tania was running the company, and that while she did not have a lot of contact with the defendant she could not say that he had long absences.
[88] She said that she heard from some sub-trades about non-payment. At the end of 2007, she said that 2 or 3 out of 10 trades complained. They would delay or refuse to provide closing documentation because of non-payment. She said she left for vacation December 26, 2007; and when she returned in January the company had closed.
[89] Manolo Natareno was hired as project manager by ICI January 1, 2007; and when he started had responsibility for the Mother Theresa project, then L.B.Pearson, and finally the Shirley’s Bay project. He had no involvement with any overseas projects. Mr Natareno had had several years of experience as an estimator and project manager before joining ICI. He had worked with Mr Ghadban at Westeinde Construction, and that is how he came to join ICI. He said he reported to Ms McLaughlin and to the defendant. Primarily he worked at the construction site but would come into the ICI offices for meetings with Ms McLaughlin, the defendant, Mr Dagenais, and Mr Ghadban. The defendant was pretty hands on at the beginning but left the day to day operations to him after a while. His job as project manager meant he was the point of contact for the contractors, for scheduling and additional work by contractors. He would also get calls from contractors over late payment of their invoices and bounced cheques. He said that contractors were to submit their invoices by the end of the month with the expectation that they would get paid in 3 to 45 days. He said that payment of their invoices was a big motivator to get them on the job and to finish the job. Once the cheques became late or bounced then he would lose control over them. If there were payment issues, he would speak to Ms McLaughlin, and then to the defendant. Sometimes he would speak to Mr Dagenais but would be sent to Ms McLaughlin. If it was still a problem then he would speak to the defendant.
[90] They had trades meetings on the site with the contractors monthly to review the status of work, and other issues. All contractors were expected to attend. Frequently, but not always, the defendant attended. He said that if payment issues came up, the defendant would take the complaining contractors aside and speak to them in the absence of everyone else. The defendant would pacify these contractors by promising that if they would wait 6 days for payment he would pay their entire invoice along with the holdback. He said that the monthly meeting was also used to establish the percentage completion in order to make progress buildings to the owner. It was the practice in the industry to front end or inflate the percentage in order to get more revenue earlier in the process. He said that by December 2007, they were pretty heavy on the front end loading to the point that he felt uncomfortable. He said that by the end of December, 2007, the Shirley’s Bay foundation work was 70% to 80% complete, but he was being asked to push it to 100%.
[91] While he found that the company was doing OK during the 12 months he was there, he found it odd that IC was selling its receivables at a large cost in order to get the money 30 days sooner. He was also concerned at the bids below cost to win a job, but could only remember the Shirley’s Bay project in that regard.
[92] The Shirley’s Bay project which had started sometime in the fall, resumed after the Christmas break on January 2, 2008. Mr Manolo said that because of the week off over Christmas, they spent a good part of the week removing accumulated snow, and getting the site ready to resume work. Aside from ICI labourers, the excavation contractor, mechanical, and electrical contractors were all on site. He said he called the office a couple of times, and when he got no answer spoke to Zaf, another employee who told him the office staff had been given another week off. On January 7, the following week, after again getting no answer he and Mr Foote went to the offices on Algoma, and found the doors locked and in darkness. They managed to get in, and found Ms McLaughlin, Mr Ghadban, and Mr Dagenais huddled in discussion. Ms McLaughlin told him that the company was closed, the money had not come back, and she was not sure if the company could continue. Mr Foote, called the site and sent everyone home. He said his paycheque was paid except for the week in January. He said that later that day, Ms McLaughlin approached him and asked him to put through an ‘extra’ for her husband, McLaughlin Painting. He told her he didn’t have a job anymore, he said he didn’t believe ICI owed her husband the money, and he wasn’t changing a thing. He also noted the defendant’s brother in the offices that day but did not know why he was there.
[93] Mounir Ghadban was the Chief Estimator for ICI from October 23, 2006 until January 7, 2008. He had completed a three year architectural technician course, then electrical technical, all which he completed in 1984. He had 30 years of experience in the construction industry with eight to ten different companies, and had met the defendant in 2002, when they both worked at Westeinde Construction in Ottawa. At the time, he was senior estimator, and the defendant was project manager for special and small projects. Mr Ghadban left ICI January 7, 2008 when he said ICI ceased to exist. He said the owner had left the country and was not coming back. He said he had been told by the defendant to call the bonding company and shut ICI down. He said that the defendant had telephoned him on January 7, 2008 between 10 and 10.30 am. The defendant told him he was supposed to return the previous evening but that he was going to be charged with kidnapping. The defendant told him that the “money had been frozen and would not be returning” to Canada. The defendant told him to “call the bonding company and shut ICI down”. He said that was the last time he ever spoke to the defendant. He said that the last time he saw him was December 21, 2007. Mr Ghadban said that it should have been business as usual on January 7; with the Shirley’s Bay project ongoing, the tail end of Silver Springs, plus the house for Dr Abou-Khier, and the house for the defendant. But Shirley’s Bay was shut down that day.
[94] Mr Ghadban identified the defendant’s signature on a number of documents that were shown to him and said he had been very familiar with the defendant’s signature on various documents including cheques.
[95] He said he had been hired by the defendant as Chief Estimator with some management responsibilities in October, 2006; and later in the latter part of 2007, the defendant made him Vice-President of ICI. He never saw any document regarding his appointment as Vice-President but took it that he was given signing authority in the absence of the defendant. He said it was joint signing authority with Mr Dagenais. The others in the management group were Ms McLaughlin, Mr Dagenais, and Mr Foote. He said that when he arrived at ICI the Mother Theresa contract had already been awarded to ICI, so he had no dealings with it. His job was to constantly look for work for the company, and to prepare the tenders. Only one in fifteen tenders would be successful. He said that initially he met with the defendant regularly with weekly meetings, but in the latter part of 2007 – the last 8 to 9 months- the defendant had been travelling a lot; and he would communicate with him more by email and international telephone. He said the period up to mid-2007 was very good, the mood was happy, tenders were close, and he felt treated well – almost like a family.
[96] Mr Ghadban said it was his job to bid the jobs and win the work. As an estimator, he would go through the specifications for a job, check the sub-trades numbers in their bids. One in fifteen tenders would be successful. His job was to assemble the lowest possible cost along with a 3% to 5% profit, and submit the tender along with a bid bond after finalizing it with the defendant. He would finalize the final bid amount with him in the few minutes before the tender deadline. He said it was always the defendant’s final decision.
[97] Mr Ghadban said the industry standard for profit was 5% up to approximately $10 million dollars, and 3% above that amount. He said that he would not pursue any jobs without the defendant’s approval.
[98] He explained that a change order was an ‘extra’, and would usually add to the contract price. It would carry a profit of between 10% and 15%. Mr Ghadban said that one would not bid a job with the expectation of an extra or change order, because they are not reliable. In new construction there would be few changes. However, if it was an existing building then extras might come into it – for example if asbestos was found during the course of renovations. But, he said it is very hard to gauge. He said that he would ordinarily work in his own little world dealing with the subcontractors. It would be a solid three weeks of work, during which he would occasionally talk to Ms McLaughlin and Mr Foote. Mr Ghadban said that his job was limited to pricing for new jobs, including some work on the ‘Syrian project’, but he had no responsibility for billing, accounts receivable, or marketing.
[99] Mr Ghadban identified the award letter for the L.B. Pearson Building project dated July 26, 2007, and explained that at that point, the whole file would be given over to the project manager, Tania McLaughlin who would prepare the sub-trade contracts, and calculate the schedule of payments for the owner. He had nothing further to do with it. He would go back to estimating for the next job. He gave as an example an email, dated October 3, 2007, he sent to Acorn to see if they were interested in partnering on a City of Ottawa job, meaning if they would finance it. They were not and he didn’t get involved. He said he didn’t usually have much to do with Acorn. As an example, the defendant asked him to send Acorn a list of upcoming tenders which he did on October 13, 2007 along with the contract value. However, this was not something he would ordinarily do. A further example was his reporting to Public Works October 4, 2007 that ICI was having difficulty getting the building permit for the Shirley’s Bay project. Again this would ordinarily be the project manager’s job, but he was asked to communicate with Public Works. He said the defendant emailed him December 11, 2007 to get him to get the last of the funds due on the City of Ottawa ‘Paramedic Post’, which had been delayed by deficiencies. Again, it was unusual for him to be asked to do these things.
[100] Mr Ghadban said that when the final price went in for tender, it always had to be accompanied by a ‘bid bond’. He dealt principally with Terry Mickalakos of Masters Insurance Brokers for these bonds. The bid bond was for 10% of the bid price, was required by the owner, and was part of the tender process for protection against a bidder backing out. The bid bond also assured the owner that if the contract were to be awarded to that contractor, then a performance bond, and labour and materials bond would be in place – 50% on each. Mr Ghadban said that Terry would frequently be around the office to check on what was being bid, the value of the contracts; and he would see him go to meet with Mr Dagenais from time to time to check on the financial health of the company.
[101] He said that from his start with ICI, he had been asked by the defendant to help with a project in Syria. Initially he got involved when the defendant asked him to get some prices for pre-cast buildings to be manufactured in Canada and shipped to Syria – Lebanon. He said he met Dallia in October, 2007. She had a business in Beirut called Paragon. He was told that she had arrived to set up a satellite company for ICI in Lebanon
[102] He identified a Caisse signature card with his signature dated September 1, 2007, and said he had been asked by the defendant to be a signing officer for ICI because he was away so much. After that, he said Mr Dagenais would bring various documents to him to sign. He said he didn’t question what he was signing, and trusted Mr Dagenais to have correctly prepared the document. For example, he identified an ‘application for payment’ dated November 30, 2007 for a progress draw on the Shirley’s Bay project. He signed it on behalf of ICI’s owner, the defendant. He also identified a number of statutory declarations which he signed concerning the Shirley’s Bay project. He said that Mr Dagenais would come into his office and put the document in front of him for signature. He said he didn’t read the documents, and didn’t question them, but took it that Mr Dagenais had correctly prepared the document. In any event he said he did not have access to the financial records of ICI. Similarly, he signed statutory declarations for ‘Silver Springs’, October 16, 2007, and November 30, 2007 for invoices for $192,609.00 and $220,889.98, all at Mr Dagenais’ request. He said he did not know if they had been factored to Acorn.
[103] Mr Ghadban identified the tender documents for the Shirley’s Bay project; and a summary of the costs prepared by the defendant that he said showed a number of amounts had been changed by the defendant, and were different from his own costs. He also identified a ‘cost breakdown’ prepared by Ms McLaughlin for calculating the progress billings on the Shirley’s Bay project. Mr Ghadban identified a ‘Bid Report’, dated May 2, 2007, that showed ICI got the lowest bid on the project. Mr Ghadban explained that as was customary, in the final hours before the bid was due he discussed the bid amount with the defendant. He said it was always a stressful process. Usually it was the project manager who took the bid along with the bid bond. In this case, he was putting the final numbers together when the defendant on the spur of the moment, said that he would take the documents. This required that the defendant would attend the tender exchange, take the call from Mr Ghadban, and insert the final number in the bid documents. The bid was due at 2pm. Mr Ghadban telephoned the defendant at the tender exchange with the final bid amount of $4.99 million. Two days later, the defendant telephoned Mr Ghadban and told him that he had made a mistake and had in error written down $4.297 million in the tender instead of $4.99 million. Mr Ghadban said that that error would have meant a $600,000 loss. He said sometimes in a situation like that an owner will let the bidder walk away where there is such a wide disparity- meaning a clear error. They had a discussion about whether they could do the job for the price. Mr Ghadban said the defendant was not interested in walking away from the job, but thought they could meet the price with better prices from the sub-contractors. He said the defendant also said he thought there would be extras. Mr Ghadban said he had concerns and thought they should walk away from the project. He said he even thought about quitting ICI, but then realized that if he quit in the midst of a bid that was clearly wrong, that he would be thought by those in the industry to have been the cause of the error.
[104] The summary sheet for the project added up to $4.3 million, and Ms McLaughlin began the process of issuing contracts. Mr Ghadban said his own summary sheet added up to $4.9 million. The defendant told Mr Ghadban that he had made the changes to help out and had listed new contractors that he said he knew; and that they had given him preferred pricing. Mr Ghadban identified Harpenden Roofing with a price of $230,000 on the list. He said he had never heard of the contractor. The price on his own list for that item was over $500,000. He also noted Dmitri landscaping and A&A Iron Works as two companies that he had never heard of. Eventually they had to go back to the contractors on Mr Ghadban’s original list and had to pay them what they had agreed to. During cross-examination, he said he saw no advantages to the defendant putting in a low bid. He said if he really had wanted to get the bid, cutting his price by $600,000 made no sense. He thought a 5% reduction with the expectation of extras was the best that could be done. He said he had never heard of something like this happening. It was his belief that since ICI was a new company that Public Works would have gone past the ICI bid because it was so low, and then taken the second bid. He said he was unaware of the consequences for the bid bond if ICI simply declined to continue and if Public Works insisted on their low bid. In any event, he said that the defendant said he was keen to go ahead with the job. He said the defendant told him it would keep ICI busy, and would be good for its reputation.
[105] That meant that Shirley’s Bay looked like it was going to be a loss. Mother Theresa School looked like it was a loss. He said they had discussions about whether ICI could survive with these losses.
[106] Mr Ghadban said he was very concerned at the time because at about the same time, they were finishing Mother Theresa School for September, 2007 but some of the trades had not been paid and were complaining. His estimating was being affected because some of the trades were refusing to give him prices for new bids because of not having being paid. He said he was also hearing complaints from Mr Dagenais and Mr Foote that contractors were complaining about not being paid. These issues were raised at the weekly meetings, and Mr Ghadban said that the defendant was usually at the meetings at the time.
[107] The defendant told Mr Ghadban and the senior management that he expected large injections of cash from the Syrian Project, and showed them a letter of intent from the Syrian Government for pre-cast buildings. He told them he thought the Ottawa office would be sustained by the ICI satellite office in Lebanon- that he planned on setting up. He told them of his plan to have a partnership with the Syrian Government to start with a pre-cast concrete plant. He said he was shown an email dated December 12, 2007, with an Ottawa firm, Seprotech, for ICI to be their exclusive distributor in the Middle East. Mr Ghadban said that the plan was to build a plant to manufacture pre-cast panels and then to ship them to remote areas of Lebanon and Syria to construct housing. He said he had some familiarity with pre-cast panels for exterior facing on buildings. Although, he said he had had no actual dealings with any pre-cast companies. As part of the plan, the defendant told him that he and Mr Dagenais would have to travel to Syria, and that the plans had been arranged for them to travel on January 11, 2008. Later he received a travel agent itinerary. Mr Ghadban said that he saw several emails concerning the plan. Under cross-examination, he said he never saw any plans or details; only a letter of intent from the Syrian Government. He said he never actually bid on any pre-cast housing. He agreed in cross-examination that because of the destruction Lebanon during the 2006 war, that there was a potential for a company to get involved.
[108] He said the defendant had told him that in order to make it all work, that he needed $2 million in the bank for a two week period by the end of December; and that the Syrian Government would match the deposit dollar for dollar. But it needed to be deposited in Lebanon so the Syrian Government could verify the amount. Mr Ghadban said the pressure was on to get as much cash deposited. This included the defendant’s plan to defer payments to the subcontractors on a house that he was building for Dr Abou-Khier, plus subcontractors on the Mother Theresa project, with the promise that they would be paid in full without holdback the first week of January, 2008 if they waited. He and Ms McLaughlin went to a number of meetings in early December, 2007 with the contractors to promote the deal. Mr Ghadban said that he was never called on to say anything at these meetings and felt he was there only to give the contractors some comfort because he was well liked by them.
[109] He said he knew nothing about any loan from Gaffney or Gafftek.
[110] Mr Ghadban said that he first saw an email chain dated November 27, 2007 between Dallia and the defendant after ICI was closed in January, 2008. The email implied that a scheme was to be outlined in an email that was to be seen by the senior managers at ICI. He said that the email from Dallia to the defendant used the term ‘habibi’ – meaning friend or lover.
[111] Mr Ghadban said that the defendant’s interest in projects in the Middle East was always present. He said he recalled the defendant looking for prices for steel to go to Beirut and his request to Mr Ghadban to follow up with pricing. He also saw several emails through the fall of 2007 suggesting that the defendant had had meetings with Foreign Affairs officials.
[112] He said he first saw an email from Dallia of Paragon in December, 2007 concerning a pre-cast building system for Syria. He had been asked by the defendant to review it but there was no discussion about it. That was followed by a suggested logo for the new Lebanon or Syrian company that was meant to be a satellite office for ICI in Ottawa.
[113] Mr Ghadban said he was copied in an email to Seprotech (which he identified) in which the defendant said he was leaving for Florida with his kids for a few days; and then would be back.
[114] In the meantime, the defendant had been building a house that he was going to sell to Dr Abou-Khier. There were a number of negotiations and changes that Dr Abou-Khier had wanted. The final price was to be $700,000. Mr Ghadban said that he thought the house was about 40% complete when he first saw it November 11, 2007; and at the most 60% complete when he saw it December 17, 2007. Under cross-examination, he said that when he saw the house before its sale, the framing and the roof was done. He remembered that the sale of the house was part of the initiative to get the funds in by December 21, 2007. The defendant had asked Mr Ghadban to arrange a performance bond for the house in order to ensure the project was completed. He called Terry at Masters who agreed November 14, 2007. The bond was subsequently emailed by Mr Ghadban to Dr Abou-Khier’s solicitor. It had been signed by Masters but not by ICI. The bond guaranteed that Trisura would complete the house. He could not remember if he ever saw the original bond, or that he had signed it.
[115] He said the defendant had told him in mid to late December of the value in Lebanon of large SUV’s as a status symbol, and that he was buying two vehicles from Surgenor’s to be shipped to Lebanon. Mr Ghadban identified two purchase invoices from Surgenor’s but said that his only connection was that he had been asked by Mr Dagenais to sign “two post-dated cheques”. He identified two cheques dated December 4, 2007. They were in the amount of $68,188.72 and $75,452.96; and contained only his signature. He said that perhaps he had the impression they were post-dated because he might have been told the cheques were not to go to Surgenor’s until January. In any event he said he remembered signing the cheques towards the end of December. The defendant was not around, and Mr Dagenais asked him to sign in his stead. He said signing cheques was the usual part of his job. He said he didn’t know if the bank would accept a cheque with only his signature.
[116] On December 19, 2007, Mr Ghadban signed a transfer of funds request for the Caisse Populaire to transfer $512,900.00 CAD ($500,000.00 USD) to a bank account in Lebanon in the name of the defendant. The transfer was signed by Mr Dagenais as well. He said the defendant told him he could not make it to the Caisse Populaire and to go with Mr Dagenais. Mr Dagenais did all the talking. The deposit was made at the counter; then he and Mr Dagenais met with a banking officer in an office to sign the transfer. The documentation had been prepared and was waiting for them. He said he was not aware the money was part of the Syrian account but had been told by the defendant that he was selling the house to Dr Abou-Khier for money that was to go to Syria.
[117] December 21, 2007 was intended to be the last day the office was open before the Christmas period. A lunch had been planned for the staff. The defendant asked Mr Ghadban and the other senior staff to go together with him to Acorn to pick up an ICI cheque. The plan was to deposit the cheque and then go to the ICI staff Christmas lunch. The group travelled together in the defendant’s truck to Acorn’s offices. They all met together with Andy Chen for about half an hour in total. He said that during that time Mr Dagenais, the defendant and Mr Chen chatted about the Syrian project for 15 to 20 minutes. Mr Chen handed him the cheque which he passed to the defendant. He did not see the amount of the cheque. They all travelled together to the Caisse Populaire to deposit the cheque. Mr Dagenais went to the counter to deposit the cheque, then the banking officer called them into his office. The defendant told them he was busy and they were to look after it. So he went into the office with Mr Dagenais and signed the transfer of funds - $1,205,424.41 USD (1,200,000.00 CAD) to an account in Lebanon in the name of the defendant. Mr Ghadban said the defendant told him that the two amounts would make up the $2 million that was to go to Lebanon for the Syrian project. He said he never saw the defendant again.
[118] Mr Ghadban identified a document “wire transfer instructions” that the defendant had shown him prior to December 21, in order to show how the money was to come back to Canada. He had also been shown a letter dated December 12, 2007, by the solicitors, Doucet McBride to the Ambassador, Syrian Embassy, with the firm’s trust account information.
[119] He said he received an email from the defendant, December 23, 2007, telling him to sign a contract for ‘Gaffney, Gafftech Solutions’ on the Shirley’s Bay project, but he didn’t because he had never heard of Gaffney, and after making enquiries determined that Gaffney didn’t do masonry work.
[120] Mr Ghadban said he received a telephone call from the defendant December 27, 2007 at 6 am. The defendant told him that his trip to Lebanon was still on for January 11, 2008. A further telephone call from the defendant (from Florida, he thought) that included Mr Dagenais and Mr Ghadban – conference call – on December 29, 2007 was for the defendant to give them instructions on how the funds were to be wired back to Canada from Lebanon. He just listened during the call. Later, Mr Ghadban said he had been told that the defendant sent him an email advising that instead of sending the funds directly from Lebanon, they would have to be sent to New York first, and then back to Canada. The defendant also told him that he was returning January 3, 2008. In a later conversation with Ms McLaughlin, he was told by her that the defendant had spoken to her and that he was returning January 6, 2008. He noted that each seemed to be getting conflicting stories.
[121] He said that sometime in late December or early January, he and Ms McLaughlin had checked the defendant’s computer and found that all of his files had been deleted. At first they considered it might be a virus.
[122] The defendant did not return January 6, and they decided to open the office anyway on January 7. Under cross-examination, he said that until that day there was no indication the company had shut down. He expected to get to work looking for new work for ICI. That day he said he was told by someone in the office that they had heard from the defendant’s ex-wife that the defendant had not brought their children back from Florida the previous day, and that she intended to have him charged with kidnapping.
[123] Mr Ghadban said that he tried several times to telephone the defendant but got hang-ups. He called Dallia Khalil to see if she knew where he was. At 10am, he said he received a telephone call from the defendant in which he said he was not coming back, the money is not coming back- it’s frozen; and that Mr Ghadban was to “call the bonding company and shut it down”. During cross-examination, he was challenged on his memory of what was said by the defendant, but insisted his recollection was accurate. He said until that moment he had expected the funds to arrive that morning or later that day.
[124] He said he relayed the telephone call to the others- Ms McLaughlin, Mr Foote and Mr Dagenais. Then he called Masters Insurance Brokers, while Lionel Foote called the trades, and Tania McLaughlin called Doucet McBride on the speaker phone. Doucet McBride said there was a new owner and that they could not do anything until they had spoken to the new owner. After the telephone call ended, Mr Dagenais admitted to having signed an agreement to purchase ICI, but said he didn’t think the agreement was real. They then all went to meet with the lawyer, Ron Price, who after reviewing the agreement told them it was ‘void because the conditions had not been met.’ He said Mr Price accepted a $1,000 retainer from each of them. Mr Ghadban said he recalled discussions earlier in October when the defendant told them that he intended to sell the company on paper to try to get rid of the union. The rest of them had told the defendant at the time that he would not be able to get rid of a union by simply changing ownership of the company. During cross-examination, he said that there was never a discussion of ‘selling’ the shares to them (Ghadban, McLaughlin, Dagenais), the discussion had involved ‘giving’ them the shares.
[125] Mr Ghadban said his last payroll cheque, December 27, 2007 in the amount of $1199.79 bounced. He said he worked the rest of the week of January 7, and was then hired away by another firm.
[126] The General Superintendent for ICI was Lionel Foote. He has had 30 years of experience as a construction superintendent with different Ottawa area construction companies. From early March, 2007 until January, 2008 he was project superintendent for the TPOF project and after one month became General Superintendent and was to oversee all ICI projects. He reported to Mr Ghadban and Ms McLaughlin primarily, but dealt with the defendant on five out of twenty visits to the office. He said Ms McLaughlin and Mr Ghadban were very experienced. At these meetings he would advise the project manager the percentage completion of the various projects for the monthly billings, although he had no responsibility for billings. He had little to do with Mr Dagenais. He would work closely with the sub-trades and sign off on deficiencies for the projects. He said that as of December 21, 2007, the TPOF and Pearson projects were at 100% completion, Silver Spring was at 95%, and Shirley’s Bay at 18% to 20% completion.
[127] He also dealt with design changes, extras, and fielded complaints from the trades about not being paid. He said that the chief projects for complaints about payment were Silver Springs, and Mother Theresa School in September, 2007. Shirley’s Bay was not a problem since it had just started. He said he had been getting complaints every 2 weeks from trades about payment to the point that they were delaying work. The complaints were “way out of line” compared to his experience with other contractors. He said he took his concerns to Mr Ghadban, Ms McLaughlin and the defendant in late June and July of 2007. He said he told them that if ICI “was going to be a high performance or fast track company, then they were going to have to pay their subs”. He said the defendant told him that things would get better, but in fact things got worse. For example, the dry wall contractor, Nation Drywall, at Mother Theresa School actually went to the school Board to complain, and slowed down his work. Other subcontractors included Ottawa Sprinkler and Ottawa Masonry. Otherwise, he said the company was moving in the right direction. When he got specific complaints about payment he would put the trade on to Mr Dagenais.
[128] Mr Foote said that he was involved in the Shirley’s Bay project from its inception including the bidding process. He said he contacted the trades to get their prices and helped put together the tender. He said that the defendant – for the first time ever- took the bid for drop off, and dropped the price by $600,000 arbitrarily. He said he was very concerned since there would only have been a 5% to 10% profit in their original bid. He said he told the defendant of his concerns who said not to worry because he had his own trades. He said it was trades that he had never heard of. He said there was lots of work at the time. He heard about a project in the Middle East but knew nothing about it. In the last six months of 2007, the defendant was there in the office although he took some trips to Lebanon.
[129] In early January, 2008, Shirley’s Bay was about 18% -20% complete. The foundations and the underground services were in place. There had been only the November progress payment that he had been aware of. They were just waiting to put up the steel. On January 2, 2008, he was on site with the project clerk and ICI labourers but no trades doing some scheduling. He learned that all of the payroll cheques – except his- had bounced. So he had the workers go to Silver Springs the next day to ensure it was ready for the residents. He said it was urgent to get it ready for the 16 disabled residents, and they had deficiencies to finish up. The following day – January 4- he said he spoke to Sebastien about the payroll problem. He said he was working on it, but it still was not resolved, so he told the staff to stay home because they were not being paid. He also told the trade who would have delivered the steel to Shirley’s Bay not to come. He said he was concerned for the trade that if he had delivered the steel to the site, he would lose it because of none payment.
[130] He recalled the telephone conversation on the speaker phone with Ian McBride when they sought direction, and Mr McBride said that he had an agreement of purchase and sale in front of him that showed that Mr Dagenais had bought ICI. He said he turned to Mr Dagenais and asked him how he could buy a company when he didn’t have two cents to rub together. Then Mr Ghadban said he had received a call from the defendant who told him that the company was in bankruptcy and to call the bonding company. Then they all went to meet with lawyer Ron Price. He said on January 8, he telephoned the trades and faxed them all copies of the bonds for each of the projects. After that he worked for another two weeks for Trisura sorting out the paper work. Then moved on to another company.
[131] He said he had had nothing to do with the house that Mr Dagenais was building, nor the Dr Abou-Khier house except for giving Ms McLaughlin his opinion on its framing.
[132] In cross-examination, he said he did not understand the Trisura claim for deficiencies at Silver Springs of $55,111.27 because all of the work had been completed and signed off with final occupancy prior to January 7, 2008.
[133] Sebastien Dagenais is 33 years of age, and was hired by the defendant in April 2006 as controller for ICI and as part of the management team. His responsibilities were to produce monthly ICI financial statements for the financial institutions and insurance companies as requested by the defendant. At that time, he knew accounting basics having taken high school courses and a certificate course at the Université de Quebec Outaouias. He said he had worked previously at the Caisse Populaire Desjardins as a teller, and then an account manager with lending limits of $25,000. In that job he had no experience preparing financial statements and no experience in construction He said he had met the defendant five to ten times through the Caisse and ICI business. During that time, he had opened an ICI commercial account at the Caisse, transferred Marlene Yakoub’s mortgage, and had opened a line of credit for the defendant. About a month before being hired, the defendant offered him a job at ICI as controller at a salary of $60,000 – a $20,000 increase over his salary at the Caisse. He told Mr Dagenais that ICI was a young company with lots of potential and he now needed an employee who could prepare the financial statements.
[134] As controller, in addition to the financial statements, he did the payroll (through the Caisse), the payables, receivables, and reconciliations. He used QuickBooks, an accounting software program that was already in use at ICI. He was not familiar with it, but learned. He reported to the defendant. The rest of the management team included Ms McLaughlin, Mr Ghadban, and Mr Foote – all of whom reported to the defendant. He said that he kept the defendant aware of the payables, receivables, and bank balance on a daily or every day basis. The direction he received from the defendant when he started in light of the high payables was, firstly – you can’t pay everyone; secondly - come up with excuses for the payables so as to delay them; and finally - in the financial statements demonstrate a profit even if there is none. Before sending out any statements or financial information, he said he always showed them to the defendant. He said the company was not profitable but the defendant insisted the statements always show a profit. He said the statements were not an accurate reflection of the company’s financial position. He said that when he told the defendant about the statements being inaccurate, the defendant told him that in order to continue the company, he had to show the insurance companies and the banks through the statements that the company was profitable. He said that he prepared spreadsheets showing the sub-trades and suppliers with a breakdown, but said that in order to show a profit, he didn’t put all the payables in the spreadsheet.
[135] On his first day on the job, he discovered that the last transactions for the previous 2 to 3 months had not been posted in the software, and that the last statements for the company were January 31, 2006, prepared by the external accountant. He understood that those previous statements had been prepared by taking boxes of invoices, and bank records to the accounting firm. He said he had no previous experience with payroll, but took the time sheets for each employee and transferred them to the Caisse payroll service. It did the calculation then returned it to ICI where Mr Dagenais wrote the cheques. He said he tried to have money in the account for the payroll but it didn’t always work. From time to time a cheque would bounce- then towards the end of December, 2007, a large number of payroll cheques bounced. It was a constant problem and he would talk to the defendant once or twice a month about cash flow problems for the payroll. From time to time the defendant would speak to one of his brothers to arrange a loan to cover the payroll. Towards the end of his 20 months at ICI, he had begun to do invoicing. He said that Mr Foote would give him the progress of the project and he would prepare invoices for the progress payments.
[136] He said he was mentored when he had difficulties by the external accountant and the defendant. He recalled when Acorn began taking an assignment or factoring of invoices. He said that only his assistant Erin and he had access to QuickBooks but it was not password protected. As time went on, he said he got to know the defendant better, but they did not socialize outside the office. He recalled the defendant speaking to him about building lots in Greely that could be developed. The idea was that if Mr Dagenais bought a building lot, then he and the defendant could get their houses built by the same sub-trades and save some money. His responsibilities soon changed so that both he and Mr Ghadban were authorized to sign cheques providing they both signed. Otherwise only Ms Yakoub and the defendant had authority to sign cheques alone.
[137] Mr Dagenais sent financial statements for ICI to various potential lenders from time to time as the defendant sought out financing. He would answer any questions that came from these potential lenders. But, he said he always showed the defendant the financial statement or information before sending them out. Often he would tell Mr Dagenais to change the statement to show more profit. He said that the defendant would say: ”ICI has to show profit”. He said the defendant seemed to understand balance sheets, profit-loss, and income-expense statements but not the ratios that financial institutions would look for.
[138] While he was responsible for the payment of bills, he said he met with the defendant once a week or every two weeks to sort out which bills were to be paid. The defendant would make those decisions, although if a particular trade was leaning on the project superintendent and calling him, he would press that trade’s case for payment. For small accounts, he would pay them himself. Similarly, he met with the defendant to discuss receivables, which were the progress payments, at least once a week; and from that the defendant would decide what payables were to be paid. It was always a discussion about cash-flow; what was coming in and what was going out.
[139] Mr Dagenais said that sometime at the end of November, 2007 the defendant gave him a document and asked that he read it overnight because he was going to sign it the next day. He read over the first 2 or 3 pages, but not the whole thing because he didn’t want to buy the company. He said the defendant told him the agreement of purchase and sale to sell ICI to the defendant was a fiction; and was only for the purpose of showing the Lebanon bank why the defendant was receiving so much money. He said he understood that the document would be destroyed immediately after the money was sent to Lebanon, since it would be of no further importance. He said the context as explained to him by the defendant was that ICI was to build condos in Lebanon. To do so, it had to show it had the liquidity; and had to transfer almost $2 million to an account in Lebanon so it could be seen that ICI had the necessary liquidity. He said the defendant told him that the government would match him dollar for dollar, so he had to show why he had so much money. The Agreement of Purchase and Sale was part of the fiction. No one in Canada was to know of the fiction. He said when he saw the document he knew it was not a serious agreement for him to buy the company. He said that; firstly, he was not interested; secondly, he had no money to buy the company; and thirdly, if he were buying a company he would not buy a losing company. He said if it had been serious he would have consulted a lawyer to see if it was ok, and would have done due diligence. Mr Dagenais identified a number of email exchanges that he had been copied with to show the account information in Lebanon where the money was to be deposited. He was asked to explain why he had told the RCMP a different story about the Agreement of Purchase and Sale. He said he was ashamed of being part of a sham, and told them that the agreement was to try to avoid the union issue for bidding on certain projects; but it was still a fiction. He said that in January, 2008, after he saw that the contract had not been destroyed, but had been widely distributed, he realized that the defendant was really trying to show that he had bought the company. He said that Terry from Masters had a copy of the agreement and asked him what was happening.
[140] Mr Dagenais explained that there had been one earlier discussion by the defendant at a management meeting to sell the company to try to get rid of the union. He said it was not suggested that he would buy the company, and he took no part in the discussion.
[141] The plan for the deposit of the money in Lebanon was identified by Mr Dagenais in a number of emails from the defendant or from Ms Khalil of Paragon in Lebanon. The details were contained in an email from the defendant dated November 8, 2007. He said that this was typical of the discussions he had with the defendant and at management meetings. It involved pulling together $2 million to be deposited in Lebanon for a two week period, after which it would be returned to Ottawa. The plan was further described in slides attached to an email from Mr Kemball of Acorn, and showed the money flow – all of which he identified. He said the defendant maintained that he wanted Acorn to be part of the project and had to show that the money would be staying in Canada but be seen to be part of the Lebanon scheme; otherwise Acorn would not want to participate. Hence the slide showed that ICI had $2 million plus another $2 million in Lebanon. The plan was for Mr Dagenais and Mr Ghadban to travel to Lebanon in January to meet various people involved in the scheme. He said it was always the defendant who gave him all the details. He said he couldn’t remember when the Syria –Lebanon project began, but he thought the defendant had worked on it for a good part of 2007. The early plan was that the defendant wanted to buy a precast concrete firm, Avac Beton, in order to acquire the technology for use in Lebanon-Syria. However, it didn’t materialize. The plan, prepared August 3, 2007, included a five year projection of income growth for ICI, designed to show that ICI was profitable and growing. He said he prepared the spreadsheet, showed it to the defendant, and he made changes to show that it was more profitable. Mr Dagenais identified an email and invoice from Dallia Khalil of Paragon which the defendant told him was for a market study in Lebanon. The invoice was for $99,252.00. He told the defendant there was not enough money in the ICI account to pay the invoice. The defendant told him he would speak to Dallia to see if she would reduce the amount of the invoice. Meanwhile, Mr Dagenais was being told by the defendant to send the financial statements for ICI to Dallia in Lebanon. He was also asked to design a logo for the Lebanon ICI which was meant to be owned by ICI in Ottawa.
[142] He identified an email to him from the defendant, dated December 19, 2007, saying that he was going to Florida and then Lebanon. It contained telephone numbers where he could be reached. It also referenced e-tickets to travel to Lebanon for Mr Dagenais but he never saw any e-ticket. He also identified an email from ICI’s solicitors containing a draft letter to the Syrian Embassy with details of the law firms trust account for wire transfers. This was meant to be for the return of the money to ICI Ottawa.
[143] Another part of the plan was for two vehicles to be purchased and sent to Lebanon. The defendant told him that these were for ICI staff in Lebanon. He said it came to his attention when his assistant showed him two cheques to Surgenor’s. He said he spoke to the defendant and told him there was not enough money in the account. The defendant told him not to worry because the cheques would not be negotiated until January after the money was to be returned from Lebanon.
[144] Mr Dagenais explained the breakdown of the funds to go to Lebanon as $500,000 from the Dr Abou-Khier house sale, $700,000 from the sale of accounts receivable to Acorn, and $500,000 from Acorn that was loaned for two weeks, for a total of $1.7 million. He described the events surrounding the transfers of December 19, and December 21, 2007. He said he had gone to the Caisse previously, spoke to a former colleague Stephane Cote that he had worked with, and asked her what documentation would be required for a large transfer to Lebanon. She told him that that she would need the reason for the transfer and the account number. He told her of the need to show liquidity in the Lebanon account. The transfer forms were completed on each of the two days by the Caisse. On December 19, he said he went there with Mr Ghadban; and on December 21, he went with Mr Ghadban and the defendant. He said that on December 19, he began with the deposit into the Caisse account of the sale proceeds from the Dr Abou-Khier house, he got two certified cheques- one for the company shipping the vehicles to Lebanon, and the other for a travel agent. The defendant told him that he wanted to be sure those cheques would go through. He then signed the transfers of $200,000 CAD and $500,000 USD to the Lebanon account. At the end of the transactions, he said there was less than $5,000 in the ICI bank account. On December 21, he said that he, the defendant, Ms McLaughlin, and Mr Ghadban went to the Acorn offices where they received two cheques- $700,000 and $500,000. Then after a stop at the ICI office, he, Mr Ghadban and the defendant proceeded to the Caisse. At the entrance, the defendant’s cell phone rang. He told them to go ahead and complete the transactions themselves. The defendant also told Mr Dagenais that he needed some US money for his trip to Florida. He deposited the $1.2 million into the ICI account, and took out $5,000 USD from his own personal account to give to the defendant. The bank records showed a withdrawal from Mr Dagenais’ personal account of $5,097.50 – the 97.50 was the exchange. After December 21, 2007, less than $25,000.00 was left in the account.
[145] He identified a cheque to Acorn in the amount of $507,000, signed by himself and the defendant, post-dated to January 8, 2008 representing the repayment of the Acorn loan plus interest of $7,000.
[146] Mr Dagenais identified the ICI banking records from the Caisse, and reviewed several of the transactions including a deposit of $524,993.08, a transfer of $12,034, certified cheques, and a number of NSF fee charges at $37.50 per cheque. These were bounced cheques that happened quite frequently in December, 2007. He said that the plan was to send as much to Lebanon as possible, and leave as little in the ICI account as possible, but enough to cover the payroll. The plan was to defer the trades to January after the money was returned; and the only way was to either write them NSF cheques or not give the trades cheques at all. He said it was easy to say, but difficult to do. The defendant told him that when he returned after Christmas, he would re-do the cheques for the subs, pay their fees and everyone would be happy.
[147] The banking records showed that after the December 19, 2007 transfer, there was $3,121.31 remaining in the account. He reviewed the banking records for December 21, 2007 that showed two deposits of $72,000 and $50,000 with a transfer to Lebanon of $1,200,070.00. The remaining balance in the account was $19,938.07. He said the cheque from Acorn in the amount of $720,000 was from the sale of receivables for December for contractors’ work in December. He said that he and Ms McLaughlin did the invoices and they needed the money by December 21, 2007. Acorn had to be sure first that they were already approved by the client. In order to do that, there was discussion by the defendant about the approval. None of the contractors were ever paid because none of the money returned to Canada, and ICI closed its doors.
[148] He said there was a delay in the transfer of funds, and he well remembered receiving an email Christmas Eve about the transfer. Finally, there was acknowledgement of the transfer. Mr Dagenais identified an email from the Caisse enclosing information for the funds to be wired back to Ottawa. He answered the email but the money never came back.
[149] He said there had been other transfers from time to time from ICI to Lebanon – to Paragon. An example was a transfer April 3, 2007 of $5,400 USD. Sometimes these transfers were to Paragon, and sometimes they were to the defendant’s personal bank account in Lebanon to cover his expenses while was visiting there from time to time. He said the defendant would always give him reasons for the transfers when he gave him instructions to transfer the money to Lebanon. He identified the destination bank account information from an email from Dalia of Paragon and from the transfer records. Mr Dagenais said that there were also Western Union transfers that did not appear in the banking records. The defendant told him to show these transfers as ‘development’ fees in the ICI accounts. If it was for travel for him, the defendant would tell him to show it as a ‘shareholder advance’.
[150] He identified a letter of employment dated May 2, 2007- mistakenly dated May 2, 2006, that showed his salary at $70,000, a car allowance of $40,000, plus a number of other benefits including a bonus. This was an increase from when he started at $60,000 with no car allowance. There were between 5 and 10 vehicles on the company expense with an expense of $5,000 to $10,000 per month. He said that whenever he and others expressed concerns about the financial state of ICI, the defendant would say that there were better jobs ahead with more profits, and the company would get back on its feet. He recalled that when Surgenor’s delivered his new Cavalier, they also brought the defendant’s new BMW.
[151] The defendant had been exploring a number of financing options from the time he began working at ICI when ICI had a line of credit with the Caisse. ICI always had money problems. The financing options included Maple Trade Finance in November, 2006 when he and the defendant met them. These discussions continued through December, 2006 with Maple Trade seeking various information and the postponement of certain secured interests. Other times, the defendant borrowed from his brothers and on one occasion from Dr Abou-Khier. When the defendant received the loan, he would tell Mr Dagenais to deposit the funds so cheques would clear. He said that the defendant told him to show these loans as shareholder loans because he didn’t want to show borrowings from others. They were all loans, not gifts, and some bore interest. Another source of enquiry was Blackhawk from whom Acorn had been buying ICI’s receivables. The defendant told him that he did not want the client to know that he was selling ICI receivables since it would look like ICI was having financial problems. In January, 2007, Mr Chen of Acorn in an email said that he was ready “to go underground in financing with ICI” to meet the defendant’s concern about the client knowing of the financing arrangement. This meant there would be no notice to the client of the assignments of the receivables. Also Acorn agreed to better terms of 3% rather than 4% as had been the case previously. By February, Mr Dagenais emailed Acorn to confirm that no lending was going on with Maple Trade- and nothing was owed. In April, 2007, another lender, BFA was suggesting to the defendant that it could be an equity partner with ICI to help it move forward to larger projects. This never moved forward. In an email in May, 2007, the Caisse boosted its line of credit to $300,000 from $200,000, and released its security to the limit of $300,000 while acknowledging Acorn’s interest in the Mother Theresa project.
[152] Mr Dagenais spoke of the weekly staff meetings of management personnel when the company’s operations would be discussed with the exception of financing. He said the defendant had told him not to discuss financing with the other managers. He did not want them to know. The financing discussions took place between the defendant and Mr Dagenais separately. He said that at the staff meetings the defendant presented a good picture of the company- but not an accurate one. Often the payables would be omitted from the spreadsheets. However, he said nothing was hidden from the defendant. He said the defendant knew that the statements were not accurate. He wanted to pay the off invoices before the current ones, and left out the current ones. He said the defendant liked to keep everything financial private. In 2007, contractors were calling not only the defendant or Ms McLaughlin, but also the site superintendent about not being paid. So that frequently, the others would question the defendant about these trades not being paid. The defendant’s answer would be that we will pay them when the money comes in, these are difficult times and the future looks bright. Mr Dagenais said the defendant said- more than once- that if anything happens to him or the company, the bonding insurance would pay the trades and ensure completion of the projects. Specifically, he said the defendant was not being truthful with Ms McLaughlin and Mr Ghadban about the finances, and told Mr Dagenais that if they knew the true state of affairs they might quit.
[153] A further example of the financial difficulties was contained in a June 26, 2007, email exchange between the Caisse and Mr Dagenais. Mr Dagenais asked the Caisse to tell him which cheques had bounced the day before so he could replace them. He told them that $300,000 was being deposited that day, and that he was working on the bank reconciliation. The problem became more widely known because contractors with bounced cheques were telling others. The defendant was having to say that if necessary he would replace the cheques with his own money.
[154] August 26, 2007, the defendant emailed Mr Dagenais to suggest that he show the financing fees under expenses for Lebanon, in order to make the financing fees less visible. The defendant’s email followed ICI’s semi-annual review by the accountants that showed large fees going to Acorn but before the financial statements were done. While he admitted it was not proper, Mr Dagenais said he changed to the fees expense to ‘development’. Other suggestions by the defendant to Mr Dagenais were that credit card payments and international transfers were to go into different expenditure accounts. The defendant checked all the statements before they went out to ensure they showed a profit. An email at the end of August, 2007 from the defendant to Mr Dagenais addressed the problem of subcontractors who were owed money. He said that in his reviews with the defendant, he would show the subs who were owed and they would come up with a plan at the defendant’s direction for managing the payments to some. When complaints were brought to him about moneys owed to contractors, Mr Dagenais said he would tell them he would speak to the defendant. He said his role with the defendant was to explain the revenue, and to show the amount owed by ICI. However, if the amounts were less than $10,000 he said he would decide on payment of those without consulting the defendant.
[155] Mr Dagenais said he was unaware that there were discussions going on between Trisura- Masters- and the defendant at the end of August, 2007 and into September, to replace him as controller. He said the defendant never expressed discontent with his work. He always did his best. In fact, he was never let go. He said that a CFO was hired sometime in mid-2007. He said he explained the financial situation to the new CFO, who then went to speak to the defendant; and was never seen again.
[156] An email from Mr Dagenais to Acorn in early September, 2007, was a detailed description of what was going on with the various projects, and delays. An email a week later to Acorn from Mr Dagenais followed his discussion with the defendant concerning the cash flow requirements, and asked Acorn for $200,000 plus a $50,000 advance. In mid-December, Erin, who worked for Mr Dagenais sent him a spreadsheet summary of all financial transactions with Acorn. It showed that $6.815 million had been invoiced through Acorn, fees of $201,933.44 had been paid to Acorn; and with $150,000 of holdback by Acorn, $6.022 million had been disbursed to ICI. The summary also showed loans or advances by Acorn to ICI from time to time. It showed the ICI line had been replaced by the Acorn advances. He said there was no real line of credit with Acorn, but they would get advances from time to time of up to $500,000.
[157] Towards the end of September, 2007, Mr Dagenais had a meeting with a plumber who had ‘liened’ one of the projects. He managed to get the lien removed, but said the defendant was too upset to even speak to the plumber. The defendant sent out an email in early October, to the management staff listing certain of the contractors for black listing because they had pushed too hard for payment. He reported the resolution of the lien to Acorn with money in the bank to pay it. This was later paid to a law firm in October in the amount of approximately $170,000. After speaking to the defendant he asked Acorn for $25,000, and then asked for a further $500,000. Acorn had complained about the liens. At the end of September, he and the defendant met with another bonding company to see if they could get better terms since they had been having difficulty getting bonds from Trisura to bid on projects. In mid-October, an email exchange between Mr Dagenais and RoyNat Capital dealt with enquiries from the defendant for additional financing, and a number of questions from RoyNat including ‘shareholders advances’ in the financial statements. October 15, 2007, RoyNat emailed the defendant with a copy to Mr Dagenais to say they were not interested in lending money to ICI until it saw more history including the year-end statements. He acknowledged that he was entitled to a bonus if he could find financing but he never obtained financing for ICI, and never received a bonus. He said it was the defendant who was searching out financing possibilities. The defendant knew the financial position was not good, that there was not enough money to pay contractors, and they very clearly needed financing.
[158] In mid-October, 2007, Mr Dagenais said he was receiving 25 to 50 telephone calls a day from contractors looking for payment of their bills, and did not know what do with them. He said he was giving various reasons, but running out of excuses, so the contractors would get tired with the excuses. He identified an email from the defendant dated October 11, 2007 telling him to be sure to answer all telephone calls and return all telephone messages from contractors; and to give excuses for non-payment and delay them. He said the defendant had already spoken to him about this. He told him that if the contractors do not get calls back they will wonder what is going on. Then they will start to call Ms McLaughlin and Mr Ghadban. He said it got so bad that he would turn his phone off. The excuses he gave to the contractors was that he did not find their invoice, that they were waiting to the following week to cut the cheque, or that they only do the cheques on the 15th and the 30th of each month. He said he spoke to the defendant, who told him he would come up with some suggested excuses. He said that over the course of the year the defendant told he was doing a good job, and seemed to understand that the complicated financing made it difficult to get the statements out. When there were cash shortages it became even more difficult.
[159] Mr Dagenais identified a manually prepared spreadsheet for October 17, 2007 itemizing the amounts that were owed on the Mother Theresa project. This had been sent to him by his assistant so he could speak to the defendant and get instructions on which contractors were to be paid. He said it had to be manually prepared because the QuickBooks system was not complete as it did not contain all the payables. This project had been completed in early September, 2007. The 45 day holdback amounts were due. October 22, 2007 was an email from Mr Dagenais to Acorn with detailed information about the projects. He said the instructions from the defendant were to keep Acorn happy, answer their questions and reimburse them when it was time. Mr Dagenais said that while Mr Chen of Acorn would speak to Ms McLaughlin and Mr Ghadban, he was the main contact.
[160] The house that Mr Dagenais was building was going forward and because ICI had good credit with certain suppliers, they would be billed under ICI. Some contractors for his house might have been the same as on the defendant’s house but he believed he had arranged his own contractors. There were a number that he did not use on his own house. An email from Pierre Hardy, the site manager of the defendant’s house dated November 10, 2007 said that he was terminating his responsibility for overseeing Mr Dagenais house, provided a breakdown of the costs on each house for allocation purposes, and said he would be available to assist in the expense allocation if there were problems. Mr Dagenais said the sharing of subcontractors didn’t amount to very much.
[161] In October, 2007, Acorn had hired an accountant to give Mr Dagenais some advice on the preparation of cash flow statements. Mr Chen of Acorn told him that he could not understand why ICI was looking for money continually throughout each month. A series of exchanged emails enclosed statements that Mr Dagenais had prepared for this accountant. He said he discussed it all with the defendant who told him to just go with the flow, do what they wanted and buy time. He said the defendant understood why ICI never had any money, and why they were trying to delay payments. He said that the cash flow statements he prepared for the accountant hired by Acorn were not accurate, the statements he sent to Acorn were not accurate, and neither were aware of the true picture of the company. An aged payables and aged receivables statement in an email dated November 8, 2007 was not accurate. He said that not all payables older than 30 days were on the list. He provided Acorn with whatever statements they asked for. When he spoke to the defendant, he would always say that while the finances were precarious, a big job will come and fix things – for example the Syria project.
[162] Mr Dagenais identified an email to the defendant dated November 8, 2007 while he was in Syria-Lebanon which contained a detailed explanation of the projects, meetings he had had, cash flow, and repeating that there were a lot of bills to pay with no money available because the defendant wanted the money to go to Lebanon. He said that at the time ICI owed between $1 million and $2 million. He could not be more exact since the statements he had prepared only showed the 30 day receivables. All had been shared with the defendant. The email to the defendant also referenced the fact that Acorn would find it strange that the whole amount was to be paid December 20 instead of it being dealt with over the month period. There were no other receivables. Mr Dagenais said this was typical of the detailed information that he would share with the defendant face to face when he was in Ottawa.
[163] November 12, 2007, the defendant emailed Mr Dagenais to ask that he pay his wife’s parents’ visa bill through ICI and expense it under ‘lumber for his house’. He said he had done this a couple of times previously.
[164] An email dated November 11, 2007 from the defendant asked Mr Dagenais to have the ‘money broker’ forward the $600,000 under Dr Abou-Khier’s name to ICI before the house was completed. Mr Dagenais was unclear on what he did in response to the email. An email dated November 14, 2007 between Acorn and Mr Dagenais addressed delays in sending financial information to Acorn, and the payment of a lien by Mother Theresa School - which reflected poorly on ICI.
[165] An email to the accountant working for Acorn from Mr Dagenais contained a further cash flow statement forecasting December, January and February. He said the statement overstated net revenues by understating an unpaid expense of $100,000. A series of spreadsheets prepared between November 16, 2007 and November 28, 2007 for Mr Dagenais which he shared with the defendant showed outstanding cheques or cheques in circulation. As at November 28, 2007, $487,156.97 of cheques had been written, dated on or before November 28, and were in circulation. There were $1,294,988 of cheques dated after November 28, 2007, signed and in the hands of contractors – essentially post-dated cheques. He said that the spreadsheet was prepared manually because QuickBooks was not complete. An email dated December 6, 2007 from a contractor expressed his unhappiness at receiving a January 9, 2008, post-dated cheque for work he had completed at the end of July. He said it was the defendant who came up with idea of sending a cheque to contractors for part payment with the balance in a post-dated cheque. A December 13, 2007 email from Mr Dagenais to Acorn enclosed a statement which he said meant that December revenues would be shown at $1,482,445.00. No payments for contractors or payables are shown or calculated.
[166] A letter from Tarion, dated December 18, 2007, identified what was required for the home warranty on the Dr Abou-Khier house. This included a $10,000 fee to be paid by ICI. Mr Dagenais said he spoke to the defendant and he decided not to pursue it. An email from Ms McLaughlin to Public Works, dated December 17, 2007, and copied to Mr Dagenais sought approval of invoices so that the assignment to Acorn could be completed by December 20, 2007. The fact that ICI needed to satisfy Acorn’s demands in order to get the invoices approved within the short period of time was discussed among the management group. He said it was a very stressful time for everyone. A progress billing summary for the TPOF project, dated December 20, 2007, and prepared by Ms McLaughlin showed the project was pretty well complete. It showed a total of $1,927,099.92 inclusive of extras, but with $213,645.47 done in December. Mr Dagenais identified an excel spreadsheet statement showing money owing to a sub-contractor on TPOF. He said the contractor was pressing for payment, the amount was not in QuickBooks; and was typical of what was prepared and taken to the defendant if a contractor had been pressing for payment.
[167] A progress billing summary for Shirley’s Bay project dated December 21, 2007, showed that out of a total of $233,686.93, $96,000 had been invoiced in December. Acorn paid ICI on December 21, 2007. None of the contractors were paid from that billing.
[168] An email from the defendant dated December 23, 2007 instructed Mr Dagenais to add information to an attached contract and take it to ‘Sean or Kevin’ of Gafftek for signature. The defendant had told Mr Dagenais that he had been trying to get Sean and Kevin to invest in the Syria-Lebanon project; and had told Mr Dagenais to find a broker who would put a mortgage on one of their buildings, and also to open a contract on the Shirley’s Bay project for Gafftek although they were not to work on the project. Mr Dagenais said he had no idea if Sean and Kevin were to be paid. An email from a broker to Mr Dagenais confirmed that discussion.
[169] Cheques in the amount of $17,449.53 dated December 31, 2007 and $30,000 dated January 31, 2008 to R.A.Electric, and signed by the defendant were identified by Mr Dagenais. He surmised that the defendant had signed the cheques before he had left on December 22, 2007.
[170] Mr Dagenais identified an email to Acorn dated, January 2, 2008, asking for $50,000 for payroll. He said that when he told the defendant during the Christmas Eve telephone conversation that there was not enough money to cover the payroll, the defendant told him that if the $50,000 cheque did not come in from the City of Ottawa that he should go to Acorn to get it factored. By January 2, 2008, the cheque had not arrived from the City, so he contacted Acorn. Because there were two payrolls during the period, he deposited the construction advances on his own house in the ICI account of $40,000 to $60,000, after discussing it with the defendant, but that was still insufficient to cover the payrolls. He said the defendant had been aware that he would owe ICI for his share of the contractors who had worked on both his and the defendant’s house.
[171] ICI Invoices that had been seized from Acorn pursuant to a Production Order were admitted into evidence. A cheque from Acorn to ICI dated November 30, 2006 was identified by Mr Dagenais as covering three invoices. This was the first transaction and was intended to cover cash flow shortages that could not be met with the Caisse line of credit. The Caisse would not increase the line without further statements, so the defendant used the Acorn facility more and more. Payments on account were not up to date, and current revenues were being used to pay on former projects 30 to 60 days later. The defendant’s instructions at the time were to only send enough invoices to Acorn to cover the cash shortages, then when the situation improved there would be no need for factoring. However, the situation became worse. Larger fees were being paid for financing, payables increased in size and quantity. Mr Dagenais said that ICI was making very low bids in order to get tenders, the financing fees were high, and the overhead was very high in part because of the defendant’s high lifestyle. The problems at the end of 2007 were worse than at the end of 2006.
[172] Mr Dagenais said the defendant had told him that he had concerns about the factoring process because it would make the company look bad to financing companies since it would show a poor cash flow. However, he said he recalled the defendant telling Terry from Masters the reason for the factoring was to get the money sooner so as to pay the contractors sooner. He told Terry this makes the contractors happier and work better.
[173] Mr Dagenais identified a signed Undertaking and Warrant re Factored Invoices dated June 13, 2007. This required ICI to deliver any cheques received for factored accounts within 24 hours after receipt. Sometimes the cheque would go directly to Acorn, and in fact towards the end all cheques went directly to Acorn. Mr Dagenais reviewed the cash flow statements, and explained that they showed invoices as current receivables that had already been factored by Acorn and reimbursed. He explained that he did have some problems with the statements and how to show the invoices that had been factored but not yet paid by the owner. He said Terry from Masters showed him how to make a journal entry removing the receivable and the loan from Acorn when Acorn was paid directly by the owner. That would then be reflected in the balance sheet. In fact, in the balance sheet for December, 2007 Current Liabilities were shown to be $2,269,208.97 when in fact that amount had been received for factored invoices. Mr Dagenais reviewed each of the monthly Acorn statements with copies of cheques from Acorn to ICI. He said he verified the statements which noted the project invoice, showed its fee for the factored invoice, and penalties, a reserve, and the disbursement to ICI. As the year progressed, the payments increasingly reflected previous advances by Acorn to ICI which were paid from the invoice. An example was the statement of February 19, 2007, which showed an advance of $200,000, but treated as a factored amount of $222,222.22. This was to be repaid from the March invoice. He said this advance was to repay a 2006 loan from Dr Abou-Khier. Mr Dagenais said the defendant was continually looking for additional financing sources. A further advance was shown in the April 10, 2007 statement. He thought this was to repay the second part of Dr Abou-Khier’s loan. The April 27, 2007 statement showed the reimbursement to Acorn of $222,222.22. The invoice was signed by the defendant. Mr Dagenais said the April 9, 2007 invoice showed GST of $4,958.40, which came out of the QuickBooks program.
[174] From November, 2006 the Statutory Declarations signed by the defendant and others from time to time were false because the sub-trades had not been paid from the previous invoice. He explained that it would only be the third and following invoices for each project that would contain false statutory declarations, because the first invoice would not have included work done by sub-trades. All subsequent invoices would; so the third billing and statutory declaration would certify that the sub-trades had been paid from the previous billing when they had not. The sub-trades were never paid from the current billing. Even though the statutory declaration form provided for stating an amount that was due to a sub-trade, no amount was ever inserted because the owner would then pay that amount directly to the sub-trade and not to ICI. Mr Dagenais said he had discussions with the defendant many times a week about the worsening financial position of ICI.
[175] Mr Dagenais’ review of the Acorn statements showed enormous cost to ICI at 4% per month plus a penalty if the invoice was not paid by the owner within 30 days.
[176] He identified a series of documents called Acorn Cash Receipts, and explained the payments back and forth. He said the difference between the ICI line of credit and the Acorn loans was that Acorn would advance 90% of the receivable with no limit, at 4% monthly and perhaps higher with a reserve amount; whereas the Caisse line of credit was 75% of receivables up to a limit of $500,000 with an annual interest of prime plus 1% or 2%. Acorn lent on receivables that were not secured by the Caisse. An example was a ‘note’ in the July 27, 2007 Acorn statement of account on the Mother Theresa project that acknowledged $50,000 requiring a release from the Caisse. This represented the receivable secured by the Caisse.
[177] Through July and August, many of the amounts advanced by Acorn were in round numbers meaning that these were loan advances rather than the sale or assignment of invoices. Mr Dagenais said that while he did not always discuss each of these advances with the defendant, when he met with the defendant to discuss cash flow, he would discuss the advances. The October 25, 2007 statement showed an Acorn cheque in the amount of $58,045.50 marked ‘ICI line’. Mr Dagenais said that after Acorn paid the Caisse line, this showed the replacement with the ‘ICI line’ and is an advance as against future receivables. During the months of October and November, Acorn remitted cash to ICI in 6 amounts. On December 5, 2007 Acorn reimbursed itself for the advances from two receivables and paid off the line. The two invoices were L.B. Pearson and Shirley’s Bay projects for a total of $1 million. A cheque dated December 21, 2007 in the $500,000 from Acorn to ICI was paid from the line of credit. Mr Dagenais said that in December and January, 2008, there was only one project ongoing so the invoices for January would not have been very much.
[178] Since the factoring started in 2006, ICI was owing more and more money, with less and less on any projects. Mr Dagenais said he discussed these issues with the defendant once to twice a week every month, and would show him the excel spreadsheets. Other times he would tell the defendant about the contractors pressing for payment, and there was no money to pay them.
[179] He said that as of December 21, 2007, the Acorn line was maxed out, the loan to ICI from Acorn was to show the most liquidity in Syria with no receivables behind it. Acorn’s note was that the loan was to be repaid by certified cheque January 8, 2008. He said that Acorn knew ICI had to show a certain amount for a two week period, and wanted their money back. He said that he had discussions with Acorn (Mr Chen) and the defendant, and they settled on the date because it was a Monday. The Acorn statement dated December 21, 2007, showed a disbursement of $720,000 after factoring. The next opportunity would have been January 31, 2008. However, there was only the Shirley’s Bay project remaining.
[180] Mr Dagenais identified a letter dated October 10, 2007, from Mr Mickalakos of Masters to the defendant, shown to him by the defendant, October 10, 2007. He said the defendant had come to see him and “told me that Marlene had to invest $350,000 in the company and that he did not have it”. He said the defendant asked if there was a way to make a false deposit into the account, because Terry only wanted a statement. He said he told the defendant – Yes - he could print a statement after making a fictitious deposit then correct the fictitious deposit the following day. He said he could not remember if he had actually done the false deposit, but that Ms Yacoub and the defendant had access to the online statement. He said he could not recall if he discussed it. He also could not recall if it was him who had sent the false statement to Terry. Although he said he knew the document had to be sent – the defendant had told him to send it. He said that he never told Terry that the statement was not correct. He said if he had told him, it would have destroyed any trust between him and the defendant. He said he would have lost his job. The true deposit was $3,500.00; and that was the amount that was shown in the ‘Shareholder’s Account’.
[181] Mr Dagenais was given access to the seized QuickBooks accounts by the RCMP, from which he printed a number of statements. He printed a ‘shareholders account for Marlene’ statement which showed a deposit dated September 13, 2007 in the amount of $100,000, and September 22, 2007 in the amount of $170,000. He said the $100,000 was a loan from Dr Abou-Khier, and the $170,000 included a further $100,000 from Dr Abou-Khier who had loaned the money believing it was for a project in Barbados being promoted by the defendant. Mr Dagenais identified a loan agreement which he witnessed between Dr Abou-Khier and ICI with the defendant and Ms Yacoub as guarantors. $200,000 was loaned by Dr Abou-Khier under this agreement which he did not enter in the shareholder register. But interest payments to Dr Abou-Khier were made from the account, as were the two repayments to Dr Abou-Khier (February and April 2007) of $100,000 each. Mr Dagenais said the defendant told him that Dr Abou-Khier wanted to be paid back, and that he did not have the money. Mr Dagenais arranged for the Acorn advances. Mr Dagenais said there were also loans from the defendant’s brothers that he was told by the defendant to show as shareholder loans. Otherwise, he said he would have shown these loans as long term debt on the balance sheet in the manner of the Caisse and BDC.
[182] Mr Dagenais again confirmed that he was very familiar with the defendant’s signature as well as that of Ms Yacoub; and identified their signatures on the various documents admitted as exhibits. He also identified the handwriting of the defendant as the author of the note dated January 17, 2008. He again explained that when he started with ICI in April, 2006, the entries in the accounting system for the previous 3 months had not been done. He said it took him 2 to 3 months to update the entries into the QuickBooks program, at which time he was able to produce a balance sheet, profit and loss statement, and accounts receivable/payable statements. He said that from the beginning the statements were not accurate because of the instructions he had received from the defendant. He said the defendant told him that the statements had to show a profit; and that either he or the defendant came up with the idea to ‘not’ show all payables. These statements were then shared with ICI’s financing companies, and bonding-insurance companies. He said he never told any of these companies that the statements were false because the defendant told him that without the financing, and bonding, ICI would not be able to survive. He said he did not really have anyone to talk to about it, and thought that this practice was common in the construction industry. He said this had been his first experience with a construction company. Mr Dagenais said that the defendant had already explained to him that big construction companies had less trouble because they were sitting on large amounts of cash; but ICI was a little company and needed money in order to grow.
[183] Mr Dagenais said that the defendant told him he wanted to see all statements before they were sent out. He seemed interested in the profits. Towards the end- the last 4 to 5 months- because things were tight, the defendant looked more at the expenses.
[184] He recalled the ‘review engagement’ conducted by Welch & Co. which began at the end of February, 2007. He said he discussed it with the defendant who was aware that ICI needed to produce statements from an external accountant. The defendant told him that he wanted the statements to show ICI with a profit of $250,000 to $300,000. He told Mr Dagenais to answer all of Welch & Co.’s questions and give them all the documents they wanted. He said that initially he prepared ICI’s year-end personally. This was his first time doing it, and he did what he thought was right. The balance sheet, payables and receivables aging summary were not accurate however, because they were missing a lot of payables. In addition, the shareholders account was not accurate. He said he gave these statements to the defendant who told him to eliminate some of the payables from the statement in order to show a profit. He said this discussion took place a few days before Welch & Co arrived to do their review. He eliminated the payables by going into QuickBooks and deleting a number of payables. He said he repeated this process a number of times, from to time, in order to show a profit. He said this was the first time Welch & Co had done a review of ICI so he wanted proof of all credits and debits. However, he did not want to show them the invoices that were in QuickBooks, and did not go into QuickBooks himself. He said the invoices were in a file that he did not produce to the accountant. They only looked at documents that he gave to them. The review took one to two weeks. He said he kept the defendant informed of what was happening a couple of times per week. He said he was feeling very stressed because this was his first time, and he did not want Welch & Co to see that the numbers were false. He said the defendant was also feeling stressed because he too knew the numbers were false. He didn’t remember if he had told the defendant how he was feeling.
[185] Mr Dagenais said the review did find some inaccuracies. He had omitted to deal with the amortization of certain expenses, some accrual items, and payroll. He said this amounted to around $50,000 and affected the final outcome by reducing the profit. After the review, the Welch &Co statements showed a final net income of $258,484.00. He said this was not an accurate figure because there were payables missing. He said he decided to eliminate the payables by just entering enough payables to show 30- 60- 90 days, and then just pulled the invoice. He did not do it by project. He said that without eliminating the payables the statements would have shown a loss. He said this was because from the beginning, ICI had used debt to pay its bills. It was always paid from the line of credit, loans, and at the end the sale of receivables. He said ICI never made a profit. Mr Dagenais said that he discussed the contents of the statements with the defendant who wanted them to show profits and to show increasing profits. The defendant told him to send these statements to BDC, Acorn, the Caisse, and Masters who he said had been waiting for the documents for them to decide on credit and bonding facilities. He said the defendant was pleased that the statements showed a profit but was clear that he wanted to see an increase in profits in statements in the future.
[186] Specifically, Mr Dagenais said that in the balance sheet, the cash, AP and liabilities, advances to directors, and retained earnings entries were inaccurate. In the income and retained earnings statement, the entries for cost of contracts, expenses because payables were missing, income before taxes, net income and retained earnings at the end of the year were inaccurate; and in the cash flow statement, the net income, AP and accrued liabilities, increase in cash, and cash at end of year entries were inaccurate. He said the defendant was aware that not all payables were in the statements, and was aware of the misstatements in the shareholder’s account for example that of Dr Abou-Khier.
[187] After the review and after the statements were sent out, Mr Dagenais said he dealt with the deleted payables by putting them back into QuickBooks but only as they were paid- and with the date of payment rather than the date of the payable which was the usual practice. He said that while he took the time to pay the deleted payables he did not have time to put them all back in QuickBooks.
[188] He said he was unable now to say what the true numbers should have been.
[189] Mr Dagenais went through the statements that had been seized by production order from BDC, said they were the statements that he had sent, and they had the same inaccuracies that he had explained. Similarly, he went through a detailed explanation of the statements that he had sent to the Caisse de Depot, and Acorn. All of which were inaccurate for the same reasons.
[190] Mr Dagenais identified the December 21, 2007, $500,000 Acorn loan agreement. The defendant told him not to say anything about the money leaving Canada because they would not advance the funds if they knew.
[191] There were two invoices that by December 21, 2007 had not been factored or assigned to Acorn- the paramedic project ($50,000), and the rental income from DND of some $5,000 per month.
[192] Mr Dagenais reviewed the QuickBooks reports and explained the inaccuracies as well as the accuracies in the statements. He reviewed the shareholders account and showed the advances to shareholders that were personal expenses of the defendant, Ms Yacoub, and Ms Yacoub’s parents. This included alimony payments by the defendant, credit card payments, wedding costs, and personal vehicle costs.
[193] He said that as of December 21, 2007, if the amount being sent to Lebanon had doubled and then returned to Canada, it would have amounted to about $3.5 million and would have been just enough to cover the debts. He said he discussed this with the defendant.
[194] Mr Dagenais described the financing of his house being built near the defendant’s house. The defendant had an ICI project number. His did not. He had a construction mortgage with the Caisse, and when the ICI subs found it had closed, they placed liens against his own house. The Caisse then refused any further advances. He said he ended up paying twice in many respects because he had paid ICI for the share of the contractors and work, and then had to pay to get the liens removed. Then the Caisse refused to complete the financing so he had to borrow from his father and from the CIBC to complete the house. He believed he might have broken even. All of the trades have been paid.
[195] On January 2 or 3, 2008 when he and Mr Ghadban spoke to the defendant by telephone, the defendant said he was having trouble bringing the money back to Canada, and gave all kinds of excuses. For example, he said he suggested that the defendant get a certified cheque for the amount to be returned, but the defendant said there would be a hold up of 30 to 40 days for the cheque to be processed. He said he had great difficulty getting in touch with the defendant, unlike during his previous travels when they would speak 2 to 3 times a week. He did not speak to the defendant again.
[196] He then met with Ms McLaughlin, Mr Ghadban and Terry – and told them there was no more money in the bank account. Mr Chen of Acorn showed up at the office and suggested that Acorn would help finish the project. However, Mr Dagenais told him the state of ICI’s finances, and that there would be no profits on this last job, Shirley’s Bay. As at that date, BDC was paid up, the Caisse was paid up, and BDC was current. This was because the defendant had told him that he had to keep them happy, and they were always the first to get paid. However, the contractors had not been paid.
[197] In cross-examination, Mr Dagenais acknowledged that did not have any experience with financial statements or accounting, but that the defendant knew he had some accounting courses. He learned about construction after joining ICI. When he joined ICI he said he would ask the accounting firm who had previously done their books if he had any questions. He agreed that ICI was not a large company when he joined. It had 3 projects underway, all of a modest size, and which included the renovations to its own offices which were quite impressive. The Caisse had loaned ICI the money for the fit-up. The Public Works project generated lease payments for ICI of $5,700 per month on a 5 year basis. He said he thought the other project was downtown but he had no memory of it.
[198] He said the factoring started in November, 2006 after a suggestion from Blackhawk who recommended that selling their receivables would increase their financing. He agreed that the defendant was looking to grow the company, wanted bigger contracts, and was always looking for new contracts. He agreed the defendant was ambitious and wanted to be successful. The projects increased in size and number, the employee numbers increased, plus he was looking at a project in Syria-Lebanon, and one in Barbados. He agreed that the defendant had looked at a number of other possibilities including a truck wash. He said the Syria-Lebanon project had been under way as far as he knew for a little over a year and a half before the company folded. The defendant gave him regular updates which he said motivated the staff. He denied that he had become a confidant of the defendant, and said the defendant would speak to him about financial matters as he would speak to others about their areas of responsibility. He repeated the efforts taken to expand funding, and repeated that there was never enough money to pay bills; current revenues were used to pay old payables. He repeated that the reasons included that ICI had huge overhead, the defendant had an expensive lifestyle, he had low bid contracts, and the projects weren’t sufficiently profitable.
[199] Mr Dagenais acknowledged that their offices were ‘beautiful’, and that the defendant had wanted to impress clients. Although he said most of the clients were government who would never see the offices. While he admitted the defendant had been generous to his employees, the defenant had an extravagant lifestyle. He said he received an increase to $70,000 after one year, which he thought was fair given what other employees received. He said the defendant never deprived himself. The only example of low bidding he could recall was the Shirley’s Bay project – the last project. He agreed that Acorn was making good revenue from ICI. He could see that from the statements. He agreed that Acorn had been prepared to work to see ICI grow.
[200] His accounting practices were discussed by him with Terry. He showed him how to show the sale of receivables in the statements. Terry was aware of the factoring of receivables by ICI to Acorn.
[201] Mr Dagenais explained that in leaving out payables in order to show profit for 2006, it was the defendant who told him to leave out payables, and he decided which ones. He was cross-examined on a prior police statement and agreed that he had said ICI had a small profit in 2006, but said that he meant it was the books that showed a profit. He said he had not expressed himself very well, but it was a false profit for 2006. He said any of his comments concerning profits were with reference to what appeared in the books.
[202] He said the Syrian project started up a couple of months or so after he started at ICI. At least that was what the defendant had explained. At the time it was very real. He said they believed there was a project in Syria, and had seen documents from the Syrian Embassy. He thought that Mr Ghadban had been doing estimating for the Syrian project. Mr Dagenais agreed the defendant was doing a lot of travelling with trips that were as long as two weeks. Although, the defendant was also spending a lot of time in the Ottawa office. He said that whether he was away or in Ottawa, he kept the defendant abreast of developments through meetings or telephone calls. He was not away 50% of the time.
[203] The cheque signing authority to him and Mr Ghadban commenced when the defendant began to travel; but after that it was a matter of convenience even when the defendant was in Ottawa. He agreed that while it was a requirement that both he and Mr Ghadban were to sign cheques together, sometimes he signed cheques without Mr Ghadban. He said the defendant was aware he was signing cheques alone. He said he was not doing it behind the defendant’s back. He also agreed that he might have signed a cheque payable to himself. If the cheque was in excess of $10,000, he would not write the cheque without first informing the defendant.
[204] In cross-examination he was questioned about the house he had built at Lake Forest Drive. He said he obtained a construction mortgage from the Caisse at 75%, and with advances beginning at 25% completion. He said he bought the lot in January 2007 with a deposit of $3,000 which was advanced by the defendant. He started construction in August or September. He said that in the beginning, all bills were invoiced to ICI, but then when he got the construction mortgage advance he repaid ICI – and that would be shown in the statements. He agreed that the cheque he wrote on ICI for his building permit bounced, and he was faced with an additional charge. His explanation was that there were “a lot of cheques out there and I didn’t know when they would come in”. He agreed that at the time, he knew that ICI’s financials were poor. He didn’t remember how much he had written on ICI’s account for contractors and suppliers for his house, but said that he had deposited more in ICI than he had taken out. He said he deposited the money into ICI after Christmas 2007. He was questioned about a number of contractors that worked on his house. All of them were paid through ICI; Samuel Construction was paid with five cheques- all on ICI- two signed by Mr Dagenais alone totalling $11,000, one by the defendant for $5,000, and two totalling $4500 signed by both Mr Dagenais and Mr Ghadban. He said the defendant knew that Samuels had been a contractor on his house. A balance owing to Samuels of $9,149.90 became one of the liens against his house; and which he paid. Mr Dagenais said he had seen the Waste Management invoices for a bin at his house, but acknowledged that one of them was probably correct. The other was for a time period when he did not think he had a bin on the property. The invoices were marked with an ICI receipt stamp dated April 9, 2008 after ICI had closed. He had no explanation for that.
[205] He agreed that Pierre Hardy, an employee of ICI had worked on his house. Mr Hardy was the site supervisor for the defendant’s house which was in close proximity to Mr Dagenais’, and spent approximately an hour and a half a day at his own house doing supervision. He agreed that ICI was paying his salary, but that he intended to repay ICI when the house was complete. Mr Dagenais also agreed that he paid Basic Forming Concrete $13,000 October 29, 2007 for his own house from ICI at a time when ICI was struggling to pay contractors. Similarly, he paid Bytown Lumber $8,335.90 in November 2007 for September invoices from ICI funds; and Paterson Consulting Engineers, $3,604, although half of the invoice was for the defendant’s house. An invoice from Insultake Insulation dated January 28, 2008, in the amount of $1,680 and received by ICI February 8, 2008 was put to him. He said he had no explanation for it; and ICI had been closed at the time.
[206] He agreed that the idea of sending funds to Syria-Lebanon had been discussed for the first time in October- November, 2007. He agreed that a considerable amount of money had been spent in Syria, including a feasibility study, transfers of funds for payroll in Syria, models and mock-ups. There had been meetings of senior management and the defendant had told them that there would be a profit coming out of it. He said he understood from the defendant that to make the idea work, they had to show $2 million in the account in Lebanon. He agreed that everyone seemed to be on board to achieve that objective. ICI had arranged an Acorn loan of $500,000 for the project; and payments to contractors were to be limited.
[207] Mr Dagenais was cross-examined about the Agreement of Purchase and Sale purporting to sell ICI to him. He repeated that the agreement was not a real sale, and had been only for the purpose of creating a reason for the huge transfer of funds by the defendant to Lebanon. He repeated that he saw the document for the first time in November, 2007, the day before he signed it. He said he was not interested in buying the company because it was not real. However, he agreed that this was a private discussion between him and the defendant. He did not discuss it with anyone else. He agreed that in previous statements to the RCMP, including a sworn KGB statement in March 2012, he had repeatedly said that the agreement had not been real, but had been for the purpose of getting rid of the unions by changing the company. He agreed that he had lied to the RCMP, but said that “I have been sincere since being here”. He said that even though at the time of the KGB statement, the RCMP had suggested he seek legal advice, he saw himself only as a witness. He also agreed that he signed an ‘investigation agreement’ that nothing he said would be used against him except for perjury. Mr Dagenais said the part about the union was the lie, but that he had never wanted to buy ICI.
[208] He said he believed that the Bank in Lebanon had asked for a copy of the Agreement of Purchase and Sale, but he didn’t send it, and didn’t know if anyone did. When asked if the defendant had been concerned that there would be enough money in the account to meet the payroll, he said that since the defendant did not come back, he really did not care about the employees. He agreed that he was obliged to repay ICI for monies he had taken out for payments to contractors for his own house. He was taken through a number of transactions noted in the ICI records showing money he had taken out, and said that as far as he was aware he had not only repaid ICI but had overpaid. Starting in October, 2007 he had deposited $65,000 into the ICI account, and a further $65,000 around Christmas 2007. He said the plan had been that when his house was completed, he would have done a reconciliation of the costs, and either paid ICI the difference, or ICI would have paid him. One statement that he identified as the ICI general ledger showed him owing ICI $15,507.10 for the month of December, 2007. However, he said this calculation was incomplete as it failed to include his deposits to IC prior to December, 2007. He identified a further record of all of his deposits into the ICI account totalling $152,736.90.
[209] Mr Dagenais admitted that payments shown to McLaughlin Painting were substantial and that the painter was Ms McLaughlin’s husband. A further substantial payment was to a friend of Mr Dagenais for work done on his house but primarily the defendant’s house. He denied that preferential treatment was shown to particular contractors. He said that over the 20 months he had been with ICI, money was owed to everyone, and contractors working on existing projects plus those that complained the loudest usually got paid. He said that in any event the statement that he was questioned on was a cheque register which didn’t show when the cheques were cashed or if they were cashed. Mr Dagenais said that there were Christmas bonuses paid to the employees varying between $100 and $200, and that they had been approved by the defendant.
[210] He said that the defendant had told him either before he left for Lebanon or by telephone, that if they ran short of money, that he could have the $50,000 invoice from the City of Ottawa factored by Acorn. He thought at the time that with the City of Ottawa $50,000 cheque, and his own construction mortgage advances that there would have been enough to cover the expenses until the defendant returned. That was the plan. He said that if the defendant had returned with the money, they would have been alright only for January and February, since there was only the one project underway and all the invoices had already been sold.
[211] Mr Dagenais said that after the defendant spoke to Mr Ghadban by telephone and told him to call the bonding company and that he was not returning; he went to the Caisse offices and told them. He said he did what the defendant had told him- he had said if anything happens, the bonding company will finish the project and pay the contractors. He admitted to taking a cheque payable to ICI, and giving $1,000 to each of Ms McLaughlin, Mr Ghadban, and Mr Foote with the balance to Ron Price as a retainer. He agreed that he did not report this to the Trustee in Bankruptcy.
[212] Peter Kemball was the founder and principal of Acorn Partners. He is currently the principal of Kendal Group which gives financial advice to high growth companies.
[213] He founded Acorn Partners in 1993 and became its CEO. He described the business model as a ‘factoring business’ in the manner of a merchant bank as opposed to equity financing. He said that Acorn favoured high growth companies as opposed to high volume. High tech companies and temporary help companies were part of the client group. Acorn had had experience with other contractors primarily where they were doing government work. It made capital available to small companies by factoring or taking an assignment of invoices rendered by the company, paying the company a percentage of the invoice, then collecting the invoice from the payor or person liable at the 30 day mark or whenever it was payable. The effect was to finance the receivables. However, the business model provided that Acorn would not take an assignment of the invoice unless the payor first executed an acknowledgement that Acorn had taken an assignment, and that it was Acorn, not the company or client that was to be paid the invoice amount. Acorn had investors that provided the funds with a return of 15% to 20% - sometimes 25% or even 30%. These higher returns would be negotiated where money was needed for a short term. Acorn charged a fee to the company or client which varied but was usually 4% of the amount of the invoice until it was paid after 30 days, plus a reserve of 6% after the 30 day mark. He agreed that the returns were high, but noted that clients also benefitted from the business model.
[214] He said he first came to know ICI and the defendant in mid-2006 when he was invited to a meeting by a broker for the purpose of arranging financing for ICI. He said he was impressed with the defendant who he understood to be the driving force behind ICI. Each month, Acorn would provide a cheque to ICI along with an explanatory Statement of Account. This statement listed the invoices being factored, showed the amount payable to ICI, the fee payable for those invoices, a reserve amount in case the invoice went beyond 30 days, and the amount disbursed to ICI. By way of example, the statement dated November 30, 2006 showed 3 invoices – all government projects- totalling $220,368.70. The amount of the fee to Acorn was $8,814.75 with a further $13,222.13 called a reserve in the event the invoice was not paid in the 30 days. The amount disbursed to ICI was $198,331.91. The documents establishing the assignments for each contract, the covenants (including the obligation to pay the subcontractors promptly when paid by Acorn), rights of indemnity and the acknowledgement required to be executed by the payor were very complete. He said Acorn preferred government contracts since they knew they would have fewer problems collecting. The result of the business model was that Acorn stepped into the shoes of ICI as soon as the invoices were paid, and then pressed the government for payment. It was not concerned with the financial statements of the client or company- only that of the payor. Mr Kemball had little direct contact with ICI other than a few meetings. His involvement was ‘episodic’.
[215] Mr Chen was his senior account manager whose job was to recruit companies or clients for the factoring scheme. He did all of the day-to-day dealings with ICI. Mr Chen had joined the firm in 1993, and had become a 5% shareholder in mid-2005. He said it was expected that Mr Chen would eventually buy the business or a portion thereof. He had the discretion to accept or reject invoices for factoring. He decided on his own to advance funds to ICI without having to speak to Mr Kemball. Mr Chen left Acorn in the fall of 2009 after it was discovered that he and the comptroller, Michael Edwards, had defrauded Acorn by taking funds to which they were not entitled. This had apparently been going on during 2006-7-8. Eventually Mr Kemball obtained a judgement against Mr Chen for $200,000-$300,000. In early 2009, Mr Edwards left the company. It was his replacement that discovered what had been going on. He also discovered that Mr Chen had been favouring a certain investor by swapping. This swapping to another investor protected the favoured investor if a particular investment was not going well.
[216] In July 2007, Acorn paid out ICI’s line of credit with the Caisse and converted the indebtedness to the factoring arrangement. The Caisse undertook to advance no further funds to ICI so that Acorn became the sole source of financing for ICI. Mr Kemball said that taking over a line of credit was only done for good clients such as ICI, which was an important client with $12 to $15 million being factored by Acorn. In November, Mr Kemball and Mr Chen were approached by the defendant to assist Mr Dagenais in producing correct cash flow statements for ICI. Acorn provided someone with accounting experience to show Mr Dagenais how it was to be done properly. This support was provided in November and December, 2007. Mr Kemball said that if it was a problem for ICI then it was a problem for Acorn.
[217] Overall he saw the volume increase rapidly from 2006 through to the end of 2007. This put pressure on Acorn to find additional investors to provide the capital. He said that up to the end of 2007 there had been no apparent problems with ICI.
[218] He identified all the cheques that had been paid to ICI, and all of the statements that had been prepared to support the transactions, all of which were entered into evidence.
[219] In November, 2007 he said he became aware of the ‘Syria project’ and the defendant’s proposal that Acorn participate in the financing of the project. He understood it would require $2 million from Acorn but was never told that $2 million would actually go to Syria. He said it was the kind of project that he would have expected of an entrepreneur such as the defendant. He said he saw the architectural drawings and the proposal for prefab concrete houses to be built in Syria. He said that investing in a project in Syria would have raised enormous problems with the US banks, was outside their business model, would have undermined their other investment activities; and he was not interested. He said he told the defendant he would not be participating. He had two meetings with the defendant and told him at the second meeting that he was not interested. He said that the Syria project for Acorn never got past the ‘account opening’ stage since there was no assurance that Acorn would be satisfied by the proposed payor- the Syrian government. In addition, it would trigger issues with US banking regulations and impede Acorn’s other investments. He said it never got to the ‘due diligence’ stage. But he saw nothing at the time to suggest the proposed project was a scam, illegal, or wrong. He repeated that Acorn was not an equity investor, and therefore was less interested in the nature of the project than being paid by the likely payor. He said “The opening of the account involved finding a party to pay him. He could not find a debtor that would not get them into serious problems with US banking regulations”. He said he was aware that the defendant intended to continue to pursue the project, and that he needed $2 million in an account to show the Syrian government that he had the wherewithal for the project.
[220] He identified the Acorn cheque to ICI in the amount of $500,000 dated December 20, 2007 which was to be a repayable loan, and the $720,000 cheque to ICI dated December 21, 2007 with the supporting statement of factored invoices. He then showed how Acorn had changed the $500,000 loan to a factored disbursement which he called an ‘advance repayment summary’ for ICI invoices dated December 27, 28, and 31, 2007. This had been reduced through the factoring paper work to $193,105.00. He noted the factored invoices were never paid. While he denied that it was actually a loan even though the cheque was marked ‘loan’, he identified a post-dated cheque, January 8, 2008, in the amount of $507,000 as ‘loan repayment’. He acknowledged he knew nothing about the transaction until after the fact. He could not have known whether it was intended to be a two week loan with the funds going to Syria. In fact, when put to him in cross-examination, he said it was the first time that suggestion had been made. He said if he had known that the funds were going to be taken offshore he would never have permitted the payments. These transactions were handled entirely by Mr Chen. He was not sure whether Mr Chen had done this sort of transaction before i.e. advancing funds without first having an invoice in hand. He said he got no calls at the time from Mr Chen.
[221] Mr Kemball said that the $720,000 cheque was a factored amount and was supported by invoices. However, the invoices were never paid by the government.
[222] A further cheque was identified in the amount of $724,000 representing the factoring of over $804,073.00 of invoices related to the Shirley’s Bay project.
[223] After learning in January, 2008 that ICI had no funds and that the defendant had left Canada, Acorn tried to recover the outstanding invoices. They were unsuccessful after they learned that the government would not pay the invoices on the ground that ICI had breached its covenant to pay the subcontractors promptly. Acorn sued the Caisse for indemnity but was unsuccessful. It did obtain a judgement against the defendant and Marlene Yacoub (Eid) for $2,812,671.82. It remains outstanding. He said that the investors had sued Acorn for their losses. Their total losses totalled some $1.737 million. As a result of the financial set back, the loss of investors and the downturn in the economy, Acorn was put into bankruptcy by two of its investors.
[224] He said he left for a vacation in California, December 15, 2007 and returned January 6th or 7th, 2008. He said that before he left, he knew the Syrian project “was not going anywhere”.
[225] He said that he had seen the ‘Offer to Purchase’ by Mr Dagenais in January, 2008 after the collapse of ICI. He said he would have been very concerned if he had known of the agreement at the time because of the question about where Mr Dagenais would have found the money for the purchase.
[226] Richard Poirier was the Collections Supervisor for the Caisse Populaire at the time and found himself enforcing a loan against security owned by ICI. Specifically, the Caisse had loaned ICI $250,000 for leasehold improvements for their offices on Algoma St, and secured against the premises. The monthly payment to the Caisse was some $4500. He said he had observed that an increasing number of NSF cheques had been processed beginning in November and increasing in December. The loan payment in November was late and the Caisse called Mr Dagenais who made a deposit to cover it. In fact, Mr Dagenais had deposited a number of payments from a construction advance into the ICI account. When he returned after in January, 2008 after the Christmas break, he saw that the December payment had not been made and called Mr Dagenais who said he would make a deposit the following day. He knew that on December 21, 2007, $1.7 million had been sent to Lebanon putting the account at zero. He said that that evening he went to the defendant’s house to see about getting paid, and could see that he was away. The loan balance was about $175,000. The next day he sent a Notice of Default under the loan by registered mail to ICI, and received a call from Mr Dagenais who said the company had no money, and to come and get the keys. He went to the offices and found it in chaos with Acorn and Trisura there. He secured the offices and took possession on the ground that Mr Dagenais had surrendered the premises.
[227] Mr Poirier said he was concerned about Mr Dagenais’ construction mortgage. He said he seemed to be almost at the limit of the mortgage, now had no job, and had no apparent means to pay it.
[228] Terry Mickalakos was at the material time employed by Masters Insurance Brokers. He specialized in construction bonding. He is now Assistant Vice-President, Surety, for Aviva Insurance Company. While with Masters from August, 2004 to August, 2013 his responsibility was to solicit and manage the client for the surety (bond) business. He said he first met the defendant at the defendant’s office and a couple of days later set up a meeting. This was just before January 27, 2006. He had never met him before. It was a sales call. The defendant was looking for a bond facility for bid, performance, and payment bonds. He assessed ICI as a general contractor. Mr Mickalakos said he was looking for working capital within the company- enough liquidity in ICI - to support the bond the defendant was looking for. He said the expectation is that there would not be a loss; and the bonding company only steps in in the worst situation. He said he was the intermediary between the surety and the contractor; and arranged a facility with Guarantee Insurance Company on behalf of ICI. ICI had previously been insured with Jevco. Masters dealt with about ten other bonding companies and Trisura was a fairly new company. When Janet Mascitelli who had dealt with ICI at Guarantee moved to Trisura in September, 2006 he said he followed her there.
[229] He said that the defendant seemed knowledgeable about bonds.
[230] Mr Mickalakos identified a standard questionnaire for contractors (January 27, 2006), and said that the answer by the defendant that no-one had been bankrupt was important. Although under cross-examination he said that his prime interest was the shareholders, not a manager; and he was aware that the defendant was not a shareholder. Nothing popped out that was negative or positive. He also identified the personal work statement of Marlene Yacoub, the owner of ICI, and the financial statements. Nothing was flagged for him. He forwarded all of the information in the memo from the defendant to Trisura. He did no independent investigation. He said the significant factors included the defendant’s plan to inject $500,000 to $1 million; and that the defendant was planning to inject further funds over the “next 2 to 4 weeks”. This was important for the working capital of ICI since a bond would be leveraged at 10 to 20 times the working capital. He also noted that at that time, September 26, 2006, the statements were noted to be under or overbilled; and there was a working capital deficit of $50,000. Normally, a company would have to either inject more working capital or increase its profits. He forwarded to Trisura a copy of a deposit by Marlene Yacoub of $350,000 into ICI. This was confirmation of the injection of capital that he had been looking for. He said that if the money had not been deposited, then he would not have continued with a bond. He said you normally trust the client. He said he was never told that the deposit had not been made as shown on the deposit slip he forwarded to Trisura. Under cross-examination, he said he was in the ICI offices weekly, looking at financial information. He agreed that the defendant seemed not to be good at day to day financial matters and therefore he dealt more with Mr Dagenais.
[231] He said the construction process required a bid bond for 10% of the tender price, and an undertaking for a performance bond and/or labour and material bond in the event the tender is successful. This is depended on the owner’s requirements for the bidding process. The premium is based on the contract value. Once approved, the bond is either forwarded to Masters or Masters issues the bond; then Trisura bills Masters. Masters then collects the invoice amount from the contractor. Masters sends the bond to the contractor with the invoice. Once the bond is issued, then Masters is liable to Trisura whether the contractor pays the invoice or not. It is the contractor’s responsibility to deliver the bond to the owner.
[232] Mr Mickalakos identified a copy of the package he sent to Trisura November 14, 2006 and which included an indemnity agreement as against both the defendant and Marlene Yacoub. The indemnity would arise in the event Trisura were called on. It also contained a trust funds term, analogous to the Construction Lien Act, and required that all funds received by the contractor- ICI- be held in trust for the subcontractors. A certificate of legal advice was required from the defendant because he was not an owner (shareholder). In addition, the package included a subordination agreement that required shareholder loans of $794,000 to be in place, that the shareholder not withdraw any of the funds, and that the shareholder loans be subordinate to the amount of ICI’s bonds from Trisura. All of this was intended to protect Trisura’s position. He said the stipulated $794,000 would have included the $350,000 deposited by Marlene Yacoub.
[233] He said he recalled a discussion about ‘factoring’, and the defendant explained that he used factoring to get sub-trade discounts. He said it was unusual but seemed to make sense at the time. He identified the balance sheet statements of ICI which showed adjustments by the accounting firm, Welch & Co. He said he couldn’t remember the conversation with the defendant about the disparity in the financial statements which showed only $389,000 instead of the required $794,000. Although he said that in his experience, the subordination amount is not rigidly adhered to, because other factors are considered. If on reassessment, Trisura is concerned then its option would be to discontinue offering bonds.
[234] Mr Mickalakos identified the bonds and documentation for other projects. He noted the Silver Springs project bond requisition, along with the performance bond and labour/ materials bond. He identified a June 7, 2007 FAX from Masters to Trisura enclosing financial statements prepared by Welch & Co for the January 2007 year end. He noted that $3.5 million as ‘work on hand’ was ‘cost to complete’ which he was interested in since the performance bond only covered cost to complete; and said there was nothing concerning in the financial statements. He noted the bond requisition form for the L.B. Pearson Building for July 2007 and all seemed fine. He also identified the bond requisition form for the Shirley’s Bay project going to Trisura that contained a summary of the bonds – performance and labour/materials. He said that if after the tender process, Trisura would feel uneasy at the result, it could cancel the contract bond. He said that if a contractor is comfortable, then the bonding company will support him; if not then the bonding company has the option to pay the penalty and then claim the amount from the contractor.
[235] He said that in December, 2007 he was approached by the defendant to put a bond on a house - residential construction. He said it was not part of his normal authority so he contacted Trisura. He said the defendant told him the bond was necessary to assure the owner that landscaping to the value of $40,000 would be done the following spring. After communications with Trisura, he gave the defendant a performance bond only, but in the amount of $350,000, because that was the sale price. He said it was for the defendant to sign the bond and give it to the owner.
[236] On January 8, 2008, he said he found out from another insurance manager that the defendant had fled the country and taken all the money. He called Ms McLaughlin at ICI to meet; then called Trisura and spoke to Janet. He went to the ICI offices at 11am and met with Ms McLaughlin, Mr Foote, and Mr Ghadban. He did not see Mr Dagenais. After the meeting, he called Trisura who said that their Chris Sekine and Ed Chasse were on their way to Ottawa. Later that evening he said he met with the Trisura people, Mr Sekine, and Mr Chasse. But on the way to the meeting with them found a FAX at his office from Public Works which put him on notice that a claim would be made if it was found that ICI had abandoned the Shirley’s Bay project and were not back on the job by January 11. He gave the FAX to Mr Chasse later when they met. He did not return to the ICI offices January 8 and 9.
[237] Later, January 17, 2008, he saw a handwritten note from the defendant that he was not returning to Canada, and suggesting Trisura not try to pursue him. He said his reaction was one of shock, since he had considered that he and the defendant had become friends. He forwarded the handwritten note to Trisura.
[238] He said that the amounts left outstanding to Masters for unpaid invoices for bonds totalled $60,645.00.
[239] Janet Mascitelli is the Vice-President of Trisura Guarantee Insurance Company (“Trisura”). She started with Trisura in January, 2006 to establish the surety business. Before that she was with Guarantee Insurance for 20 years where she was a team leader with ICI as a client, but she said she had no specific recollection of ICI. She said her career was marked by experience in the construction field. She said that a general contractor in construction is typically low on assets and liquidity, unlike a road construction company which may have significant assets in the form of road building equipment. She explained the difference between insurance and bonds; bonds are like a credit facility to guarantee completion of a contract or to guarantee payment to sub-trades.
[240] She said she received a memorandum from Masters (Mr Mickalakos), September 26, 2006 setting out a description of ICI, and a recommendation for ICI. Masters as the broker, was the eyes and ears of Trisura, and virtually all communications went through the broker to the insured- ICI. She identified her handwriting notes on the memorandum. She knew that the defendant was the business person. She noted that the defendant was going to inject $500,000 plus the $270,000 already in ICI. In cross-examination she agreed that the statements only showed $209,000 not $270,000 as reported in the memo from Masters. She said she had no memory of ICI at Guarantee other than that there had been no problems with any of its jobs. She did say that she had been unaware that the defendant had been bankrupt in 2005, and that was an important matter; and that if there been other issues Trisura would not have advanced a bond for ICI. She met with the defendant September 29, 2006 and prepared a memorandum. She said she had believed that the defendant was knowledgeable about bonds and the bonding process. While it was an introductory meeting, she said they had discussed the need for depositing more liquidity in order to support the kind of projects he was talking about. At the time there was over $500,000 in shareholder loans and the defendant had promised that more capital would be injected. She felt another $300,000 to $500,000 would be necessary to meet ICI’s plans. That would require that the shareholder loans be subordinated to Trisura by way of an agreement. She prepared a subordination agreement October 6, 2006 on the understanding that a deposit of $350,000 would be made, and left it there.
[241] She said that an indemnity agreement was necessary to ensure that Trisura would be made whole if there had been a default; and that the indemnity agreement contained a trust funds provision to underscore the ‘pay when paid’ principle. She said this was the foundation of the agreement. She said that she looked at leveraging 10 to 20 times the working capital for bonding purposes. Ms Mascitelli explained the need for working capital, the ‘pay when paid’ principle; and how the bonding needs for Federal contracts differ because Federal projects cannot be ‘liened’; and therefore bonding for subcontractors at all levels becomes necessary.
[242] She identified a FAX she received from Masters on October 10, 2006 which enclosed a copy of a deposit record showing that $350,000 had been deposited to ICI. She said that if that capital had not been injected then Trisura would not have extended as much bonding. She said she had never been told that the deposit had never been made. She said she did not conduct an independent investigation, and that a high degree of trust is enjoyed between contractors and sureties. She then prepared a memorandum dated October 11, 2006 outlining the facility needs of ICI and the conditions or limits to be imposed by Trisura. She identified her handwriting on the memo, and identified the handwriting of her superior, Chris Sekine. She said she took his notes to be his instructions to her, and noted he wanted lower limits and better financial records from ICI before moving forward. These included subordinated debt of $794,000 to be available to Trisura.
[243] She discussed the Mother Theresa project and the bonding process. It was the first bond.
[244] A bid requisition form from Masters was received by Ms Mascitelli in February, 2007. She said it had been difficult getting financial information but she had been assured that all was ok. A FAX from Masters received March 1, 2007 noted a bond request, and enclosed two in-house ICI financial statements. The memo noted ‘Acorn factoring’ which she said she had never heard of before, but was told that the defendant was using factoring to pay his trades without delay. The memo noted that bank financing was on its way, and finally that adjustments were shown on the in-house statements by an accounting firm, Welch & Co to reflect a large receivable that had not been shown. She explained that she had rejected the defendant’s request for a lien bond because he admitted owing the money, so she told him to pay the money and then fight over the disagreement. She said his request made no sense. She noted that the bulk of the accounts payable were in the 60 to 90 day range with not much over 90 days. She said that showed he was paying his trades. She noted that the under-billing and over-billing was not of great concern because bonding is to meet the cost to complete with $10,000 remaining. She reviewed the bond requisition form for the Silver Springs project, and noted that a performance bond and labour/materials bond, each in the amount of $565,085, authorized by her June 7, 2007 was not unusual. On June 7, 2007 she received the January 31, 2007 year-end financial statements from Welch and Co. She noted that the shareholders loan was not what she expected, but there was a nice cash balance, and she decided to continue the facility. She said if the accounts payable had been understated then that would have been concerning. She said it looked like the company had had a good year, and while there were some cash flow concerns, she continued to be concerned about shareholders loans.
[245] Ms Mascitelli reviewed the bond requisition form for the Shirley’s Bay project. She said that she recalled that there was an unreasonable spread between the ICI winning tender and the second place tender. While she was not happy with it, nothing had been problematic before, and she decided to go ahead and place the contract bonds; which she did September 4, 2007 in the amount of $2.148 million each for a performance and a labour/materials bonds. She did however ask for four subcontractors to be bonded, and said she would not have bonded the job without an assurance that in fact the subcontractors had been bonded. She also confirmed that in addition to having the subcontractors bonded, she wanted to see monthly progress payments, how much work was done, how much was certified, how much was paid, and then how much was in the bank. In fact, she never did see the further financial statements as she had requested.
[246] Ms Mascitelli said that Masters (Mr Mickalakos) had been asking for a bond for a house the defendant was selling. She said this was unusual since it was for a sale, not construction. She said that while it was for $40,000 of landscaping to be done, the full amount of the sale price had to be covered. The amount of the bond was $350,000 – 50% of the sale price. She said it made no sense to her to pay $7,000 for a bond to secure $40,000 of landscaping work, but she said Mr Mickalakos had been pressing her.
[247] The first inkling of a problem was on January 8, 2008 when she received a call from Mr Mickalakos. She immediately spoke to Mr Sekine and Mr George, her superiors. In cross-examination she confirmed that the trigger for a performance bond was for the owner to declare the contractor in default. She received the faxed defendant’s handwritten note January 21, 2008 and was disconcerted. She said it looked like the defendant was leaving Trisura to cover all of the losses. Trisura has since taken proceedings on the indemnity agreement and obtained judgements against ICI, the defendant and Marlene Yakoub.
[248] During cross-examination, Ms Mascitelli agreed that the financial statements never showed a subordinated amount of $794,000, but said that there had been other discussions concerning the activities of ICI, and that overall she was satisfied that the company was doing well; and that things would improve. The balance sheet showed retained earnings of $426,221 in addition to the lower shareholders loans so the total was over $700,000, but below $794,000. She said she accepted the answer that she was given that the numbers had changed for a valid reason. Although, she said she did not limit the broker’s authority when she saw the 2007 financial statements.
[249] Ed Chasse is a partner in the Toronto based adjusting firm BBC&G with a specialty in bond claims. The firm had 18 years of experience. He had considerable experience himself before joining BBC&G. He said he was telephoned by Chris Sekine of Trisura mid-week the week of January 8, 2008 to meet with employees of ICI since it looked like the owner had closed the doors and disappeared. After meeting with Mr Sekine, he attended a meeting at lawyer Ron Price’s office along with Mr Sekine, Ms McLaughlin, Mr Dagenais and Mr Ghadban. They had a general discussion which included the defendant’s absence and the fact that subcontractors had not been paid. He said he then drove to the Shirley’s Bay site and met with Ms Cote of Public Works. He saw that there had been partial completion. The foundation looked to be complete. There was no activity at the site. He had a general discussion with Ms Cote about re-tendering the job. He said he then drove to the ICI offices and met with the employees, Messrs. Ghadban, Foote, and Dagenais. His goal was to get the financial records for each of the projects that had been bonded by Trisura. He said that there was no-one ‘steering the ship’ at ICI, the employees and subcontractors had not been paid, there was no money, and the owner was gone. He gathered up some 8 to 9 boxes of documents and removed them to an overnight copying company, and returned all the documents the next morning. He couriered some of the documents to his office in Toronto, and carried some of them himself. He said some of the documents needed to be updated. There was a high degree of urgency because if there was delay, then he would be facing increased claims for delay.
[250] Mr Chasse said it took Public Works about a week to get notices of abandonment out on all the projects. He also got calls regarding Silver Springs and Mother Theresa High School. He met with Mr McCart who told him he expected to be appointed Trustee in Bankruptcy by the Caisse, and met with Andy Chen of Acorn. Then he drove to Dr Abou-Khier’s house, and met with Dr Abou-Khier and his lawyer. He saw that the house was about 70% complete. The roof and exterior was almost complete, leaving the inside work to be done. Dr Abou-Khier did not have the original bond signed by ICI, so he said that was the end of it.
[251] He established that there were liens on Silver Springs and Notices of Claim on the Federal projects. All 6 performance bonds were called on. The Silver Springs project did not have an original so he declined to honour that project. Public Works had an original bond for L.B. Pearson but it was unsigned, so they reached an agreement that Trisura and Public Works would each be 50% responsible.
[252] For the labour/material bonds, where the owner has paid ICI but not the subcontractors, then Trisura is liable because they are trust funds. He said he examined the progress payments by the owner, the accounts receivable, and saw that ICI had over $1 million in debt. ICI had nominal equipment and no assets. He said ICI seemed to be relying on the subcontractors to do the work. He reported to Mr Sekine daily and recommended reserves be set up. He obtained instructions to gather the information and settle the claims. He requested invoices, evidence, and statutory declarations from the subcontractors. Some claims were denied. For example, he said that Gafftek (Sean Gaffney) telephoned and said he had been the project manager on the Shirley’s Bay project. Mr Chasse saw that his contract was for carpentry, asked him for a statutory declaration, and never heard from him again. He said that while he was working for Trisura he considered he had an obligation to discharge the obligations under the bond.
[253] Mr Chasse said he became an inspector in the bankruptcy proceedings for ICI and provided information to the Trustee. It was clear to him that ICI was not a viable entity, having defaulted on its obligations; it had no bank account, no assets and huge liabilities. He reviewed each of the projects and indicated which had been honoured and paid: Mother Theresa performance and labour/materials was honoured and paid; TPOF performance and labour/materials honoured and paid; Silver Springs not honoured because a signed bond could not be produced; L.B. Pearson performance and labour/materials was partially honoured because the original bond was unsigned- 50/50 with Public Works; Shirley’s Bay performance and labour/materials honoured and paid; and Dr Abou-Khier house performance bond only, not honoured because no signed original bond was produced. He reviewed spreadsheets that he had prepared during his adjusting process, the claims, those that were rejected, and the final pay-outs. The net pay-outs by Trisura after receiving payments from the owners including holdbacks included $83,324.35 for Mother Theresa (labour/materials), $465,800 for L.B. Pearson (labour/materials), $581,607.28 for TPOF (labour/materials), $1.5 million for Shirley’s Bay (performance - $690,000, labour/materials- $828,296.13). One of the twists was that Public Works took the position that the $1 million that was owed on L.B. Pearson was to be set off against other losses on the other federal projects. This made the adjustment process and the calculations a bit more complicated.
[254] He said that for the performance bonds, Trisura steps into the shoes of the contractor and takes on the responsibility to complete the project up to the value of the bond. As a consequence, Trisura in the form of BBC&G became the general contractor for the Shirley’s Bay project. It was re-tendered, and the contract awarded after receipt of 4 or 5 bids. Astco was the successful bid at $4.7 million. Since the job to date had cost Public Works $1 million, the total project cost was $5.7 million.
[255] Chris Sekine is and was senior Vice-President Surety for Trisura and reports to the President, Mike George. He has held that position since January 2006. Janet Mascitelli reports to him. Prior to Trisura, he was at Travelers and Zurich. He said his initial involvement was to approve a new client for Janet Mascitelli. He never met the defendant or Marlene Yacoub, and had had no contact with ICI. His work with Ms Mascitelli was to establish limits for ICI. He expected that once the limits were established then he would have no further dealings unless an issue arose. Mr Sekine reviewed Ms Mascitelli’s memo of October 11, 2001, and explained his handwritten notes on the memo concerning the limits for ICI, and his recommendations. Specifically, he noted that “Marlene had injected another $408,000 in September, with another $350,000 in October for a total of $794,000.” In this case, he wanted the authority for the bonding to rest with Ms Mascitelli as opposed to giving a power of attorney to Masters; and calculated the working capital at $794,000. He explained that the 20x multiple would ordinarily justify a facility of $14 million, but in this case with it being a new company, the limits he set of $2.5 million single and $5 million aggregate were conservative. He said this was made in reliance that $350,000 would be injected under the subordination agreement. He said that if the $350,000 was not there, then a reduction to $1.5 million single and $3.5 aggregate would be likely. He said he was informed that the $350,000 had been deposited in October. To his memory, he said the limits for ICI were not increased beyond those set out in the October memo. If that had not been the case, then he would have immediately suspended bonding. He said that you trust the contractor’s financial statements, trust that the client will comply with the law and various contracts; and rely on the annual audit or review by a reputable accounting firm. The subordination agreement protects the bonding company and protects the company by requiring sufficient working capital. Mr Sekine said he was unaware the defendant had been bankrupt in 2005, and had he known he would have declined the bonds or would have looked a lot more closely. He described the relationship between the Accounts Payable and Accounts Receivable, and the health of the company. He also explained that once a job or jobs are well under way, then Trisura’s performance bond exposure is reduced because the bond is intended to cover only the cost to complete. As the job continues then the cost to complete is reduced. That is the reason the limits are not iron clad amounts but more akin guidelines. He said that Master’s recommendation of $6 million single with $7 million aggregate was not outrageous, but he wanted more information. He said he had no recollection the capital went below $794,000, and was never advised that the $350,000 had never been deposited. He was never aware of the Acorn factoring, and had never heard of it in the construction trade. Under cross-examination, he was shown the ‘Welch adjustment balance sheet’ which showed the shareholders loan at $389,000 – significantly below the subordination agreement amount of $794,000. He said the company seemed to be doing well, and he may well have approved the bonding. The cost to complete as at May 31 was $3.768 million.
[256] Mr Sekine said that he would have discussed the Mother Theresa project, the bid bond, and the contract bond before the October 11, 2006 contract date.
[257] At the end of December- early January, 2008, he heard from Mr George that the defendant had gone; and that a large amount of money had been wired out of the country. He said that he and Mr Shaw drove to Ottawa and met the next day with Ron Price, the lawyer, and the employees of ICI. He agreed to pay the employees to continue to assist him with their corporate knowledge, the books, and records, but not their back pay. He said he felt a huge sense of urgency to act before the banks or receivers moved in. He went to the ICI offices and removed several boxes of documents for copying but returned the originals. He said he kept no originals. After that he said he had no further involvement.
[258] Michael George, President and CEO of Trisura explained the losses sustained by Trisura and his involvement. He became President in 2006 and CEO about 2011, He has been involved in the surety business since approximately 1988. As President, he recruited Mr Sekine and Ms Mascitelli; and had known Mr Chasse for 20 years. Ms Mascitelli had prior dealings with ICI before joining Trisura but having Mr Sekine as her supervisor reduced the importance of the prior history. Mr George explained the function of a surety company as distinct from an insurance company and the relevant factors when considering a new client for bonding. He said that the equity in the business is very important. The greater the equity the larger the bonds. Similarly, he explained that an undisclosed bankruptcy would create a number of questions concerning the client’s competence, honesty, and reliability which would require answers. Mr George explained the ‘pay when paid’ principle as a core provision; and that a general contractor typically has few assets other than equity, few receivable and few payables because the contractor is like a broker and uses the sub-trades to finance the work. Providing the contractor ‘pays when paid’ then the sub-contractors finance their part of the work for 30 to 45 days, i.e. until the general contractor gets paid by the owner.
[259] He said he knew nothing of ICI until January 2008 when he learned that the defendant had left the country, had wired funds out of the country, and it looked like the company was in freefall. He immediately called in Chris Sekine and Glen Shaw, and sent them to Ottawa. Then he called Ed Chasse of BBCG, an adjusting firm with experience in surety cases, who also left for Ottawa. He described himself as the ultimate decision maker with respect to the claims, but only after receiving the advice of Messrs. Chasse, Sekine and Shaw. He confirmed that the Silver Springs bond had not been honoured because no signed original could be produced, and explained the process by which a bond is provided to the owner, and that it is the contractor’s responsibility to deal with the owner and produce to the owner an original signed by the contractor. He explained that he considers the bonding company has completed its function when it has the approved bond, signed by Trisura sent to the contractor. Trisura had no responsibility to ensure the bond was signed by the contractor and delivered to the owner. He explained that with respect to the L.B.Pearson project with Public Works, while no original signed bond was produced by Public Works, it was an original bond. They agreed that Public Works and Trisura would share liability on the bonds equally. He believed that each paid out about $250,000 to the sub-trades.
[260] Mr George said that the Shirley’s Bay project had the most work left to do. Ultimately there was a shortfall by Trisura of $600,000. In cross-examination, he was questioned about ICI’s very low bid. He said he expected that ICI had answered Ms Mascitelli’s concerns at the time about the low bid; and said he had the impression that the defendant in lowering the bid at the last minute by that amount meant he really needed the cash flow. He said that no thought was given to Trisura having ICI complete the project since the principals had left the company. He said he had zero confidence that ICI could complete the project. He identified a summary of the net amounts Trisura paid out totalling $2.1 million. However, in cross-examination it became clear that even though Mr George insisted the total was correct, the items in the list were incomplete. He confirmed that Trisura had obtained a judgement against the defendant and Marlene Yakoub in the amount of $2.1 million but has not collected anything on the judgement.
[261] Michael Kennedy is and was account manager for commercial accounts with Surgenor’s, and had previous dealings with the defendant. He described the defendant as a good customer although he had not dealt with him since the late 1980’s. He identified a vehicle Purchase Agreement for a ‘Yukon’ in the amount of $68,254.72, signed in late December 2007. He also identified a Vehicle Purchase Agreement for a ‘Tahoe’ in the amount of $75,518.00. He said the defendant told him he was changing banks and wanted him to hold onto the purchase cheques dated December 4, 2007 for a few days. He said he would call and tell him when he could cash the cheque, but that the trucks needed to be shipped right away to Dubai where he was starting up a company. Mr Kennedy said that on the first working day after New Year’s, Mr Dagenais called him to say that the cheques would not go through because the bank accounts were empty. He said he promptly called the shipping company, found out the vehicles were in transit ‘on the water’ and reported it to Mr McGurn, the Vice-president. He said it was not normal practice to hold a cheque unless it was for an important customer.
[262] Michael McGurn is Vice-President of Surgenor’s and oversees all operations including inventory management and customers. He has held that position for 15 years. Mr McGurn said that Mr Kennedy reported that the vehicles had been shipped to Lebanon; and that with the assistance of GMAC, the RCMP, and his lawyer, he was able to get the vehicles returned. However, he had to pay the shipping costs of $7,480.00. He said the vehicle purchase agreements were dated December 11, 2007, the cheques were dated December 4. 2007, and it appeared the vehicles were purchased at the same time.
[263] Chris Allen is the Director of Finance for the Ottawa Carleton Association for Persons with Development Disabilities (OCAPDD) where he has been employed for 28 years. The OCPADD operates a facility for the developmentally handicapped called Silver Springs Farm, and in 2007 had put out tenders for a rebuilding program to accommodate residents from the Smiths Falls Rideau Regional Hospital which had closed. The OCPADD had employed an architect, Larry Gaines. Mr Gaines had prepared the specs and drawings; and then arranged for the tender process. The lowest bid was ICI. He said price was the determining factor. Throughout the contract period, Mr Gaines regularly visited the site. He visited from time to time, and issued cheques following receipt of invoices approved by Mr Gaines. The invoices were either signed by Mr Ghadban or Mr Dagenais. None had the defendant`s name. Mr Allen identified a letter dated June 13, 2007 from ICI directing that all payments for invoices be made to Acorn, and explaining that the accounts had been assigned to Acorn. From that date forward, all payments for invoices were made to Acorn in accordance with the direction. He said he understood that the certification in each of the signature blocks on the invoices was a representation that all subcontractors had been paid up to the date of the invoice- except for holdback amounts. The first problem turned up in late November, 2007, when he received a telephone call from a sub-trade asking if ICI had been paid. He paid the next invoice dated November 30, 2007 by cheque dated December 11, 2007 to Acorn, as had been the practice. However, two invoices December 20, 2007 from ICI were not paid because he said he had heard that something was wrong with the company and liens began to be filed. Mr Gaines issued a Certificate of Substantial Completion December 21, 2007. Later in January 2008, Mr Allen received an email from Acorn seeking payment of the previous two invoices, but he left it with his solicitors, and it was not paid. He said that the total he paid out to the sub-trades was $296,109.72 plus costs to complete of $55,111.27 and legal fees of $16,460.23. In cross-examination, he agreed that the documents showed payments totalling $278,956.00 and was not able to explain the difference.
[264] Mr Allen said he believed the project was bonded, and was shocked to discover from Trisura in January, 2008 that since he didn’t have the original bond signed by ICI that it would not be honoured. What he had received shortly after the tender process was a copy of the bond marked copy from ICI. He said he didn’t think anything of it; and could not recall if he had showed the bond to Mr Gaines. He confirmed that OCAPDD did not claim in the ICI bankruptcy.
[265] Patrick Daher currently works for Investissements Quebec in Montreal, but in 2006-7 was employed with the BDC (Business Development Bank of Canada) in Ottawa as an account manager. He said he met the defendant through a referral from a bookkeeper that the defendant was looking for additional financing. He said he met the defendant in the winter of 2006, saw that ICI was a profitable company, that the defendant wanted additional capital and a letter of intent for $300,000. He said he needed various documentation; and in an email February 5, 2007 the defendant said he needed a letter of intent for $300,000 in order to get a $200,000 loan. February 6, 2007 he sent a letter to the defendant as a letter of interest not letter of intent, and listed what he needed to see in the form of statements and additional information- which included net available of $250,000. Mr Daher identified an ICI balance sheet that was faxed to him February 12, 2007 on which he had made some notations which concerned him – advance to shareholders - which looked to him like the company was being used as an ATM. Under cross-examination, he said he had been unaware until later in the process of dealing with the defendant that he had already applied for and been approved, May 30, 2006, for a $150,000 loan by another group within BDC. Being in the midst of leaving for his new employment in Montreal, he sent the file on to another group in BDC. Ultimately the defendant`s application for a $300,000 loan was turned down.
[266] One of the ICI suppliers, Wayne Bent, owner of two Rona stores said that his Accounts Receivable clerk had told him about payments due from ICI. He said he liened 5 properties, and identified one of the liened properties as that of Dr Abou-Khier in the amount of $1,691.80. He said the total claims were $45 -$46,000, and he settled his claims finally for $32,000.
[267] Barry Pretty is an electrical contractor from Arnprior who works mainly in Ottawa. He started the work in October, 2007, and completed the electrical rough-in on the Dr Abou-Khier house on January 3, 2008. At that time, he liened the property. He believed that 95% of the rough-in had been complete. He had considerable extras which had been approved by Pierre Hardy, the ICI supervisor. Ms McLaughlin visited the site once or twice a week. He thought it would have required another week’s work to complete the electrical. He said that inside, the flooring, drywall, and cabinetry was left to do. He said the house was 4,000 sq. ft., beautifully designed and had considerable decorative lighting. A big push on the work was evident in October-November. By December 19, 2007, the whole house was ‘tarped’ in so that the stonework could be done in the cold weather. By January 3, 2008, they were waiting for drywall. He said he had been promised a cheque by Ms McLaughlin in the amount of $10,000 before Christmas. It never materialized, and she told him that the defendant had left the country for the holiday, leaving the inference that there was no one to sign a cheque. He said that a couple of years later he received about $14,000 as his pro-rated share of the lien claimants. He said he was out about $25,000.
[268] Mr Pretty said that he also did electrical work on the nearby Dagenais house that was being built. Mr Dagenais paid him for his work there.
[269] Fadi Rajab was the stucco sub-sub-contractor on the Silver Springs project and Dr Abou-Khier’s house. He was sub-contracted by HBC Stucco. On Dr Abou-Khier’s house he liened the property when he learned the defendant had ‘fled’ the country. His claim was $60,628.81 being the original quote plus extras for the stucco work. He said he had submitted an invoice to ICI about 2 weeks before Christmas, and when he didn’t get paid he stopped work. At the time, he had completed 75% of the stucco work. Dr Abou-Khier eventually contracted to have him complete the stucco for $10,000. He eventually received $8,000 from his lien. He said he was out about $50,000. On the Silver Springs project, he said he received nothing for his $104,000 of work. He said that he had received a cheque from the defendant but it was no good. He said he kept it as proof as to what happened but was unable to produce it, and said he had never been asked by the RCMP for it. He finished the work in early December, 2007.
[270] Dr Kamal Abou-Khier is an Ottawa dentist who had come to know the defendant in 2005 when he had the defendant build a mixed use building on property he owned. He was pleased with the work and his reliability. The arrangement was that the defendant had been hired to be the construction manager, and Dr Abou-Khier paid the trades. He said they became friends, socialized together, and his family became his patients. During their many conversations, the defendant had a number of investment ideas, and once asked him to invest in ICI. On the advice of an advisor, he declined. On another occasion, he loaned the defendant $200,000 with interest at 20% for a 6 month period secured by the property that he eventually purchased from the defendant. He said the defendant paid him back in full.
[271] He said that in late July or early August, 2007, the defendant came to pick him up to show him a house that he was building and that he offered to sell to Dr Abou-Khier for $700,000. He was persuaded that it was a good deal and that a similar house in the development would cost $900,000 to $1.1 million. He told the defendant he was interested and entered into an agreement of purchase and sale. The terms of payment were $100,000 on November 23, 2007, the date of the agreement, and the balance of $600,000 payable on closing on December 17, 2007. This was extended to December 19, 2007 when he paid the balance due. He said he knew when he signed the agreement of purchase and sale that the defendant wanted to be paid in full before the house was completed, and said that his lawyer had suggested a performance bond to guarantee the house would be completed. The defendant had explained to him that he needed the money to go into a bank account in Syria for a large housing development. He said the defendant showed him an online picture of the housing development in Syria that he said looked ‘fabulous’. He knew before signing the agreement of purchase and sale that while it was a good deal for him, the condition was that he would pay for the house before it was completed.
[272] He said that he received a call from the defendant on Christmas Eve from the defendant wishing him a happy Christmas. In early January, he received a call from his lawyer telling him that the defendant had left the country. He was able to get a phone number for the defendant and called him. The defendant answered- and told him that it was never meant to hurt him- that he was being pressured by his ex-wife over the kids- and that he would speak to Pierre Hardy (the ICI house building supervisor). He said he never heard anything further from anyone at ICI.
[273] A meeting with the bonding company and lawyers at his house in early January took place but nothing happened. Trisura did not ask to see the bond. He said Trisura ignored him. Then after some delay, he started an action against Trisura the following year. At mediation Trisura offered $160,000 which he accepted, but when Dr Abou-Khier could only produce a signed copy of the bond, they withdrew the offer and walked out of the mediation. He said that the defendant had given him the bond in an envelope. It was signed by ICI and the bonding company, but it was a copy. He said he did not give it to his lawyer.
[274] In the meantime, Dr Abou-Khier continued trying to get his house finished. He had a number of contractors and trades give him prices, and eventually had the house finished. He said he spent slightly in excess of $1 million to complete it. That included $600,000 to $700,000 for the interior work. He said this did not include anything that had not been anticipated by the original agreement with the defendant. He did add a swimming pool and fence afterwards. He confirmed that he was never asked by the RCMP about documents to support the cost to complete the house; and had nothing with him in court.
[275] At the close of the Crown’s case, a statement of admissions was filed. Also filed were ‘will-says’ of Jeffery Henderson, Martin Baribault, and Sophie Carriere, agreed by counsel, so as to make the witnesses’ appearances unnecessary. Further books of documents were filed into evidence
[276] Admissions establish the following:
a. At the time that ICI was incorporated, the defendant was an undischarged bankrupt;
b. The defendant was the controlling mind of ICI and all documents signed by Marlene Yacoub were signed at the behest of the defendant. She was at all material times the sole director and shareholder of the ICI;
c. The defendant and Marlene Yacoub had signed a pre-nuptial agreement providing that were they to separate, all legal interest in ICI would revert to the defendant.
d. Based on T-4 slips issued by the Company, the defendant was paid $56,000 salary in 2007and Marlene Yacoub was paid $51,000 salary in 2007. Source deductions for the defendant for 2007 total $20,215. Source deductions for Marlene Yacoub for 2007 total $20,215.
e. On January 29, 2008, the Caisse Populaire petitioned ICI into bankruptcy.
f. In respect of the fiscal year ending January 31, 2007, the accounts payable which appears in the Welch & Co financial statements was understated by $935,991. In respect of the fiscal period beginning February 1, 2007 and ending July 31,2007,accounts payable on Welch & Co financial statements was understated by $686,162;
g. On December 19, 2007, $500,000 USD was transferred from the Caisse Populaire Account of 6364144 Canada Inc. to an account at the Byblos Bank in the defendant’s name. This money came from proceeds of the sale of 1321 South Beach Boulevard, Ottawa;
h. On December 21, $1,205,424.41 USD was transferred from the Caisse Populaire Account of 6364144 Canada Inc. to an account at the Byblos Bank in the defendant’s name. This money came from funds received from Acorn Partners, to wit $720,000 in respect of the sale of Accounts Receivable and $500,000 in respect of a working capital loan.
i. The evidence of Martin Baribault of the Caisse, is as follows: Beginning around July 2007, Mr Baribault noticed that Non-Sufficient Fund (NSF) cheques from ICI were becoming more regular. The problem accelerated in November to the point that he was considering closing the account given the time and energy that was being spent on the administration of NSF cheques. In December, he called a meeting with Mr Dagenais to discuss the matter and express his concern.
j. The evidence of Sophie Carriere: Ms, Carriere is the Credit and Accounts Receivable Manager for Essroc, a supplier of ready mix cement. Essroc did business with ICI Construction Management from 2005 to 2007. On June 21, 2005, ICI opened an account with Essroc. From 2005-2007, Essroc invoices were paid between 45-180 days. In June 11, 2007, however, a notice of past due account letter was sent in respect of invoices from February and March, 2007, and, on June 27, 2007, the account, in the amount of $22,943.07, was given to a collection agency. On July 12, 2007, a cheque was received from ICI and was forwarded to the collection agency. On July 12, 2UU7, ICI’s credit privileges were cancelled. Deliveries were made only after payment was made by cash, certified cheque, or credit card. On August 10, 2007, payment in full of the account was received from the collection agency. Credit privileges were then reinstated on August 25, 2007. On January 10, 2008, ICI’s account was frozen. At that time the following amounts were owed.
i. Shirley’s Bay (RCMP) = $56,692.77. The full amount was recovered from the Bonding Company. In June 2008, payment was issued by Trisura.
ii. 1321 South Beach/a671 Lake Forest (Abou-Khier residence) = $13,013.96. A lien was issued against the properties for the full amount, but only $4,576.89 was recovered. The statements on which the lien was issued are true and are set out in the lien (Exhibit 49, Tab 5).
iii. 3501 Richmond Road = $437.19. Lien rights had expired for this project, they wrote off this amount.
Crown and Defence Positions
[277] The position of the Crown is that the defendant deliberately set out to amass, through the offices of ICI, as much money as possible. He then fraudulently took this money for his own use, without regard to the interests of his employees and creditors for whom he held the money in trust. In the language of R v Theroux, the defendant knowingly practised a deceit on the creditors of ICl and other persons causing them significant deprivation. He notes there is no extradition or mutual assistance agreements between Lebanon and Canada.
[278] The Crown’s position on the main count #1 is that there are three main bases of liability of the defendant: Firstly, that he had constructed a matching scheme through ICI to get the money out of the country; then after he got the money out of Canada he took the position that he was no longer the owner of the company since he had sold the company- and that the proceeds from the sale were what he had with him in Syria-Lebanon. Secondly, the Crown says that the defendant committed fraud when he took the funds out of Canada since most of the money had been impressed with a trust under the Construction Lien Act and belonged to the contractors and trades people of ICI. Finally, on that first count, the mere failure of the defendant to return the funds to Canada, and the failure to attend the creditors meeting and assist the Trustee continued the deprivation.
[279] On Counts 2 and 5, the Crown points to the evidence of the false financial ICI statements that misstated the financial position of the company to show ICI as more profitable than it was. On Count 3, the Crown points to the evidence of the defendant fiddling the paper deposit transactions to the Caisse by showing a $350,000 deposit by his wife when in reality it was $3500.
[280] Counts 4 and 8 include the evidence of the defendant victimizing ICI by charging personal expenses to ICI with no year-end adjustment. He used ICI’s funds to enhance his own income without accounting for it. Count 6 relates to the purchase of two luxury SUV’s from Surgenor’s by the defendant, and paying with a post-dated cheque on the ICI account when there was no money in the account.
[281] Count 7 is money laundering and includes the evidence of the wire transfers, and shipping the SUV’s overseas. The Crown relies on the evidence of the fraudulent bank statement, and the Welch and Co financial statements that had been uttered to various financial institutions with the intent that they be relied upon.
[282] The defendant’s position is that there was no criminal intent. He says the Lebanon- Syria scheme was a bona fide effort to get work in the Middle East, that the financing required the $2 million deposit, and that Syria froze the funds after it had arrived there, preventing him from returning the funds to Ottawa. His position is that an essential witness was Andy Chen, the point man at Acorn, who was not called by the Crown, and who had been found guilty of defrauding Acorn but by inference had a great deal of knowledge about the financing of ICI. He says that the inaccurate financial statements produced by ICI along with the false statutory declarations were typical of the construction business, and not a foundation for criminal intent. He claims that the defendant’s ‘irrational’ and ‘bizarre’ behaviour’ is explained by his having been diagnosed as being bi-polar, and having been threatened with kidnapping charges by his ex-wife.
[283] On the issue of the bankruptcy, the defendant’s position is that it was precipitous, and unnecessary; and that its poor administration benefitted only the Trustee in Bankruptcy.
[284] Finally, it is the defendant’s position that it is the creditors (Caisse Populaire, Trisura, and Acorn), employees of ICI, and the Federal Government who all lack credibility, and are at fault in varying degrees for the financial collapse of ICI. The defence further contends that in any event the Crown and the RCMP are in a conflict position in marshalling a criminal prosecution when civil proceedings would have been sufficient.
The Relevant Legal Principles
[285] The essential elements of fraud are defined in R v. Theroux, 1993 CanLII 134 (SCC), [1993] 2 S.C.R. 5 which held as follows: the actus reus is a ‘dishonest act’ that is established by proof of deceit, falsehood or other fraudulent means. The dishonesty of the act in respect of “other fraudulent means” is evaluated objectively according to the standard of a reasonable and honest person; a ‘deprivation’ that is established by proof of prejudice (or risk of prejudice) to the pecuniary interests of the victim. Finally there must be a causal link that the ‘deprivation’ (or risk of deprivation) is caused by the deceit or falsehood. The mens rea requirement is met where the person had subjective knowledge of the prohibited act; and furthermore the person had subjective knowledge that the act could have ‘deprivation’ (or risk of deprivation) as a consequence. The consequence is for another person to lose their pecuniary interest in certain property - or having that interest placed at risk. An accused’s honest belief that he was entitled to the property in question is a mistake of law and does not negate the mens rea element.
[286] A trust is created under the Construction Lien Act, R.S.O. 1990, c C-3-, s 8, 9, for funds from construction in favour of suppliers and sub-contractors who have supplied work or services; or are owed amounts by a contractor. The contractor is the trustee, and it is not open to the contractor to divert the funds to his own use in breach of the trust. These legal principles and the trust obligations of a contractor were recently re-emphasized in 6157734 Canada Inc. v Blulime Entreprises, 2016 ONSC 1794, March 17, 2016 (Div. Ct). A criminal breach of trust offence is basically the offence of fraud that has the additional element of a breach of trust by means of that fraud. (R v. Gopher, 2005 SKQB 243 @ paragraph 149).It is no defence to a crime to say that there is widespread abuse in the industry where that abuse constitutes a criminal offence. (R v. Bast, 1990 CanLII 7721 (SK CA), 1990 CarswellSask 255, [1990] S.J. No 289 (Sask C.A.)). Unpaid source deductions for employees and GST are captured by a deemed trust. (First Vancouver Finance v. M.N.R., 2002 SCC 49, [2002] 2 SCR 720.)
[287] An offence under s. 362 (1) (b) (s 362 (3)) of the Criminal Code defines a false pretence as a representation of a fact, present or past, that is false. It requires evidence that credit was obtained – not necessarily the accused’s credit- it could be credit for an employer. The mens rea requirement is that the person made a statement of fact that is false with the intent that it be relied or acted upon. There is a presumption under the section that where it is proven that money was obtained by a false pretence, prima facie, there is an intent to defraud.
[288] The actus reus of a false pretence for the purpose of a s 363 C.C.C. offence (s 363 (1) (a)) is that a person made a representation of a matter of fact either past or present – that is false; and the false pretence made by the accused caused another person to execute, make, accept, endorse or destroy the whole or any part of any valuable security. “Valuable security” is defined as “any bond” or any “security for the payment of money” (s 2, CCC). The mens rea component requires that the person knowingly made a statement of fact that is false with the intent that it be relied upon; and with intent to defraud or injure another person.
[289] For an offence under s 198 (1) (s. 198 (1) (a)) of the Bankruptcy and Insolvency Act the elements are that the person must be a bankrupt, the accused must have disposed of the bankrupts’ property, and the disposal of the property took place before or after the “date of the initial bankruptcy event” as defined in the Bankruptcy and Insolvency Act, s 2. The mens rea requirement is that the accused intended to dispose of the property – subjective intent; and the accused had subjective knowledge that the act could have deprivation as a consequence. The Crown must prove that, at the time of the commission of the alleged offence, the bankrupt knew that he or she would become bankrupt or was wilfully blind to that prospect. (R. v. Reed, 1992 BCCA 837).
[290] An offence under s. 198 (1) (s 198 (1) (e) of the Bankruptcy and Insolvency Act contains four elements: The person must be bankrupt, the person must obtain credit or property, the person, or another person to his knowledge, makes a false representation, and the false representation is made after or within one year immediately preceding the date of the initial bankruptcy event. In addition, in the case of a corporation, it must be established that the accused had control of the corporation, so that, pursuant to sections 159 and 204, he can be guilty of the offences as though he were the bankrupt. The mens rea requirement must include “knowledge of the facts constituting the offence”. (R. v. City of Sault Ste Marie, 1978 CanLII 11 (SCC), [1978] 2 S.C.R. 1299 at 1309). Therefore, the mens rea must accompany all four elements and requires knowledge of them. The Crown must prove that, at the time of the commission of the alleged offence, the bankrupt knew that he or she would become bankrupt or was wilfully blind to that prospect. (R. v. Reed, 1992 CanLII 837 BCCA).
[291] An offence under s 198(1) (s 198 (1) (f)) of the Bankruptcy and Insolvency Act requires proof of the following elements: the person must be bankrupt; the accused must have concealed or removed the bankrupt’s property or debt (due to or from the bankrupt); and the disposal of the property or debt took place within a year or after the “date of the initial bankruptcy event” as defined. The mens rea requirement is that the accused intended to dispose of the property – subjective intent; and the accused had subjective knowledge that the act could have deprivation as a consequence.
[292] The elements of an offence under s 462.31(2) (s 462.31(1) (a)) C.C.C. is captured by a broad array of activities involving property or the proceeds of property. Almost anything done with property will satisfy the conduct component of the offence (R v. Trac, 2013 ONCA 246 at paragraph 83). Evidence that the property was obtained by the commission of an offence is not required (United States v. Savein, 2014 BCCA 290 at paragraph 15). The mens rea requirement is specific intent- the accused does something with the property with the intent to conceal or convert that property or proceeds; and the accused must know or believe that all or part of the property was obtained, or derived indirectly or indirectly, from the commission of an indictable offence. Wilful blindness may be sufficient to meet the knowledge or belief element of the mens rea (United States v. Savein, 2014 BCCA 290)
[293] An offence under s 367 (s 366(1) (b)) C.C.C. requires proof of the following elements: the accused made the document; and the document in question is a false document. (A false document is defined in s 321 C.C.C. and includes a material alteration to a genuine document). The mens rea requirement is that the accused knew the document to be false; and the accused intended the document be acted on by another to their prejudice or that they would be induced by the document to do or refrain from doing anything.
[294] The elements of an offence under s 368 (1)(c) (s 368 (1)(b)) C.C.C. are as follows: that the accused caused, or attempted to cause another, to use or deal with or act on a forged document; and the document is question was a forged document (and includes a material alteration to a genuine document). The mens rea requirement is that the accused knew the document to be false or forged; and intended that the document be acted upon as authentic by another person.
Analysis
Count 1
THAT THE SAID Roland Eid, between April 21, 2005, and January 5, 2009, both dates inclusive, in the City of Ottawa and elsewhere in the Province of Ontario and elsewhere in Canada, and elsewhere in Lebanon, did by deceit, falsehood or other fraudulent means defraud creditors of 6364144 Canada Inc., operating as ICI Construction Management, and other persons of property, money, or valuable security having a value in excess of $5,000, contrary to section 380(1) of the Criminal Code, and did thereby commit an offence pursuant to section 3 80(1) (a) of that Code;
[295] The applicable legal principles are to be found at paragraphs 285 and 286.
[296] The evidence shows that the defendant took $1.7 million belonging to ICI, a company he controlled. As a consequence, ICI was unable to continue to operate since it had no further working capital or means of obtaining that capital. As a result of the fraudulent removal of the company’s funds, creditors of the company, including trades people for whom the majority of the money was entrusted were not paid. With respect to the $500,000 that Acorn may in fact have lent for the express purpose of the “Syria Project”, the defendant did not inform Acorn that the money was going offshore into his personal account. In fact he concealed that he was taking the money off-shore since he knew that was a condition of the loan. He would not otherwise have received the loan.
[297] The evidence shows that the defendant knowingly orchestrated the transfer of the money overseas to his personal account in Lebanon. At the very minimum, if there was evidence that he knowingly diverted the trust funds intended for the operation of ICI, for the payment of subcontractors overseas, the defendant was aware that he was putting the pecuniary interests of ICI and its creditors at risk. He is therefore guilty of fraud under the heading of “other fraudulent means “whether or not he intended to return the money and continue with ICI. The defence theory that the defendant sent the money to Lebanon for the ‘Syrian Projects’ is not supported by the evidence. After failing to return the money to Canada, the defendant did not render an explanation to the creditors and employees of what he had done as a misunderstanding or error. To the contrary, he took the position that he had already sold the company to Mr Dagenais, had no further interest in the company, and that he was starting a new life in Lebanon with his family. I don’t doubt that he had been pursuing the possibility of projects in the Middle East. There is no evidence that any contracts were secured or even at the negotiation stage. However, the defence theory that his work in the Middle East was legitimate and therefore the money transmission off-shore was not fraudulent does not follow. It was the assembly and sending of the funds to Lebanon to his own personal account under the prevailing circumstances of ICI and its creditors that constitutes the fraud. The defence argument that the ‘bizarre’ behaviour exhibited by the defendant was caused by his bi-polar condition is simply not supported by the evidence. While it is true that when he was arrested in 2010, there was an issue about his medication. That evidence was admitted through the voir dire evidence referenced above. However there was no evidence concerning any behavioural issues arising from his need for medication. I am not prepared to take judicial notice of evidence that was not present but might arguably account for his behaviours. It is just too speculative. Besides, these so called bizarre behaviours had been two years earlier.
[298] The evidence establishes that the defendant deliberately set out to amass, through the offices of ICI, as much money as possible. He then fraudulently took this money for his own use, without regard to the interests of his employees and creditors for whom he held the money in trust. To paraphrase the court in Theroux, the defendant knowingly practised a deceit on the creditors, employees, trades, and subcontractors of ICI causing them significant deprivation.
[299] The defendant’s manipulation of the money transfers is further evidence of his deceit. The first transfer to Lebanon was in the amount of $500,000 (US) and took place December 19, 2007. The money came from the sale that same day of the ICI house it had been constructing for sale to Dr Abou-Khier. It was only partially finished. The sale proceeds were deposited in ICI’s account at the Caisse, then a bank draft in the amount of $500,000 (US) was transferred that same day to the defendant’s personal bank account in Lebanon. The defendant had pre-arranged for the transfer with Mr Dagenais. Then the defendant told Mr Ghadban he would have to go the Caisse in his stead with Mr Dagenais. Mr Ghadban had signing authority. Mr Dagenais was known to the Caisse from his previous employment. The defendant had arranged not to be present. The second transfer occurred December 21, 2007 and was in the amount of $1.2 million. Of this amount $720,000 was from the factoring by Acorn of $800,000 of invoices for Public Works (Shirley’s Bay), Ottawa-Carleton Association for persons with Developmental Disabilities (Silver Springs), and the City of Ottawa. In addition, Acorn gave ICI a short-term loan in the amount of $500,000 repayable with interest January 8, 2008. The evidence was clear that Acorn had refused to loan any amount that would be sent to Lebanon for fear of offending the US Banking regulations and causing Acorn future problems. The senior management team went to the Caisse for the transfer and at the last minute the defendant claimed he had to make a telephone call, and asked Mr Ghadban and Mr Dagenais to look after it. The plan had been to then go the ICI Christmas Party since it was the last day of work before the New Year. Again the defendant avoided having to be present for the transfer. Again the $1.2 million was sent to the defendant’s personal bank account in Lebanon.
[300] The timing of these transfers along with the phony sale of ICI the previous week combined with the defendant’s physical absence from the Caisse at the time of the transfers would have permitted him to maintain that the sale of ICI was valid. The validity of the sale was not argued by the defence. The defence theory that the Caisse had an obligation to stop the transfer has some merit. The evidence is that the defendant had been put on notice by at least Acorn concerning the problems with sending funds to Lebanon. Yet he persevered. No one, including the Caisse, could have assumed that sending the funds to Lebanon was part of a fraudulent scheme. While it may have been unwise, I do not accept that the Caisse’s failure to prevent the transfer had any relevance to the defendant’s fraud.
[301] Mr Dagenais’ evidence was that he had prepared a spread sheet for the defendant in November 2007 which showed that the company was in a deficit to the extent that if the money that the defendant wanted to send to Lebanon were doubled and returned to Ottawa - $3.4 million- as he had been told, that ICI would only just be able to pay its construction bills. The Trustee in Bankruptcy, Mr McCart said he thought from his review in the first week of January 2008 that ICI was in a loss position of over $2 million. Mr Chasse from Trisura said that almost $2 million was owed by ICI on jobs that had been validly bonded. Mr Allen for Silver Spring said that his subcontractors were owed $550,000. The bond was not valid according to Trisura, and the Disabilities Association had to pay that themselves. There was approximately $340,484 outstanding to subcontractors for the house that the defendant had sold to Dr Abou-Khier. In addition, because ICI had not paid source deductions and for GST, there was approximately $1 million owing to the Federal Government. There were also unpaid payroll cheques for staff.
[302] These amounts total approximately $3.8 million; and come close to the amount shown by Mr Dagenais in the spreadsheet that he had reviewed with the defendant in early November 2007.
[303] The evidence is considerable – Mr Dagenais, Ms. McLaughlin, Mr Ghadban, Mr Foote – that the defendant was fully aware of the financial straits ICI was in. Mr Dagenais said he spoke to him at least weekly; and when the defendant travelled he had a satellite telephone for communication with the office including Mr Dagenais. There were weekly meetings. They had all expressed their concerns to the defendant. But the defendant consistently dismissed their concerns on the basis that everything would be fine after his return to Ottawa after the New Year.
[304] There is no basis in the evidence for the argument that the defendant had been victimized by ICI senior management (including Mr Dagenais), by Trisura, and by Acorn in the person of Mr Chen. All except Mr Chen gave evidence.
[305] The defence argued that the absence of Mr Chen’s evidence was a serious gap in light of the other evidence that Mr Chen had been fired by Acorn for having taken funds that he was not entitled to. Acorn’s position was novel in this case in that, except for the $500,000 loan, it had no concerns at all about the financial health of ICI. The reason was that it never expected to receive any money from ICI. It was never a creditor of ICI under the factoring scheme. It was only the receipts for invoices from the owner – in this case the Federal Government- that it was interested in. So far as the loan was concerned, the defendant was fully aware that Acorn did not want its money sent to Lebanon; and he knew the reasons why. I can see no basis on which Mr Chen’s evidence might have been of assistance. There were no gaps.
[306] As for Mr Dagenais, he was more a victim than many of the others. He lost his job. His reputation was in tatters. His mortgage with the Caisse was cancelled. He had no money and no assets to finish his house. In fact he ended up paying twice for much of the completion work to his house. The defence made much of his having given different reasons for having signed the contract to purchase ICI. Mr Dagenais’ explanation, which I accept was that he knew the contract had been a sham at the time because according to the defendant it was solely to permit him to account to the bank authorities for the large transfer of funds to Lebanon. Mr Dagenais said he thought the contract had been destroyed, and when it surfaced in January, 2008 he said he felt very foolish for having signed it. It is true that the other had managers ridiculed him for signing the agreement since they knew he had no money. His explanation that he had been asked to sign the contract in order to get rid of the union was consistent with a joke that the managers had with the defendant early in 2007, but admittedly was a silly explanation. Mr Dagenais admittedly contradicted himself with silly explanations. However, by that time he knew that he had been had by the defendant, who he had looked up to as a hero and as a role model. He was a young man with little experience, who had been devoted and dedicated to the defendant; and ultimately was hung out to dry by him- even to the extent of trying to shift responsibility for the debacle to him. The irony is that an accountant with any training and experience would not have done the defendant’s bidding as Mr Dagenais did. Mr Dagenais must have recognized that in retrospect.
[307] The circumstances surrounding the last bid on what would become the last job for ICI suggests that the defendant had put his scheme into motion earlier than November 2007. Mr Ghadban had prepared a tender for what was known as the Shirley’s Bay project for the federal government. It was due August 24, 2007 at the bid centre. This tender was based on quotes he had received from various suppliers and trades, along with a profit mark-up of 4% to 5% as was the custom. It was also the practice that moments before the time for the tender, all of the trades would be called in order to confirm their best price. Mr Ghadban would customarily have someone attend the tender while he made the last calls and then telephone the number to the bid centre. In this case, the defendant announced that he would attend the bid that day. He gave no explanation. He had never done that before. The bid amount that Mr Ghadban had settled on after calling all of the trades and suppliers was $4.99 million. Mr Ghadban telephoned the defendant and gave him that number for the bid. Later, the defendant claimed that he had written the number down incorrectly as $4.297 million - $600,000 below the bid- and over 12% lower. Since the profit was only 4% to 5%, the bid amount was significantly below ICI’s cost. The defendant refused to withdraw the bid, or let the bonding company deal with the low bid; and insisted the company move forward with the contract. His explanation at the time was that ICI would make up the difference with extras, and by getting lower prices from the trades. Mr Ghadban was clear that neither was going to happen. Even with increased profits on extras, it would have taken close to $5 million in extras to generate the $600,000 difference. Mr Ghadban knew the trades who did the work and was the best placed to negotiate lower prices. He said that it would have been impossible. He said he even considered quitting over the issue, but then realized that if he left ICI, many in the industry would think that he had been responsible for the under bid. The under bid not only triggered concerns within ICI but also with Trisura. The defendant expressed no concerns.
[308] It is no coincidence that it was the proceeds from the factored invoice from the Shirley’s Bay project that formed a large part of the funds that were sent to Lebanon on December 21, 2007. The underbid is consistent with the defendant’s plan to amass as much money as possible for him to send it offshore. The matter of the profitability of the Shirley’s Bay project was irrelevant. It was only the cash receipts so the money could be sent to Lebanon to his personal account. It is reasonable to assume that the scheme was in place by the end of August 2007 when the tender was made, and when the future of ICI was looking even more dismal.
[309] The defendant’s scheme intrinsically breached his trust obligations to the suppliers and subcontractors by failing to abide by the ‘pay when paid principle’ (see 6157734 Canada Inc. v Blulime Entreprises, supra). None of these funds belonged to the defendant or ICI. What made the scheme even more diabolical was that there was no chance that any of the receipts from the Shirley’s Bay project would be sufficient to pay the trades and suppliers. They in fact had financed his project so that he could take their money. Whether he intended to return with the money is irrelevant. He breached the trust obligations the moment he sent the funds offshore. Once the funds were sent offshore and were at risk, then the fraud was made out. I do not accept the defence theory that it was a good project that went wrong.
[310] Before December 2007, the defendant had been consistently in breach of his trust obligations. Ms McLaughlin’s answer was that all construction companies sign declarations that they will pay the subcontractors from the receipts but don’t comply. She said the declarations were worthless. That is not the law. Contractors who intentionally conduct their business in violation of the trust provisions of the Construction Lien Act, supra, run the risk of committing fraud. The defendant’s pattern of spending these trust funds on his high life style, documented throughout 2007 was the commission of ongoing fraud.
[311] The source deductions and GST that remained unpaid during the final 6 months of 2007 were also subject to a trust. (Excise Tax Act, and Income Tax Act, s 227(4)). By taking the funds offshore the defendant breached the trust, and committed a fraud.
[312] Surgenor’s was defrauded of some $7,500.00 after it managed to recover its vehicles that were in transit to Lebanon. That was what it cost them to ship their vehicles back. The defendant had written post-dated cheques through ICI to pay for the vehicles knowing that there were no funds. What funds there were, were trust funds. Even if the defendant had returned to Ottawa there would have been no money to pay for the vehicles.
[313] The defendant’s scheme to defraud the federal government, creditors, suppliers, subcontractors and employees through ICI worked. The total damages from his fraudulent activities came close to $3.8 million.
[314] I am satisfied beyond a reasonable doubt that the elements of fraud and the particulars in Count #1 have been made out.
Count 2 and Count 5
Count 2: AND FURTHER THAT Roland Eid, between April 21, 2005, and January 5, 2009, both dates inclusive, in the City of Ottawa and elsewhere in the Province of Ontario and elsewhere in Canada, and elsewhere in Lebanon, did by means of a false pretence or fraud obtain credit contrary to section 362(1) (b) of the Criminal Code, and did thereby commit an offence pursuant to section 362 (3) of that Code;
Count 5: AND FURTHER THAT Roland Eid, after or within one year immediately preceding January 30, 2008, in the City of Ottawa, and elsewhere in the Province of Ontario, and elsewhere in Canada, and elsewhere in Lebanon, obtained credit and or property by false representations as to the financial position of 6364144 Canada Inc., operating as ICI Construction Management, declared bankrupt on January 30, 2008, contrary to Section 198(l)(e) of the Bankruptcy and Insolvency Act; and did thereby commit an offence pursuant to section 198(1) of that Act;
[315] The applicable legal principles are to be found at paragraphs 287 and 290.
[316] The financial statements were false from early 2007 until the end. They were intentionally falsified by the defendant in order to misrepresent to all potential lenders, creditors, and financial institutions that ICI was a profitable company so he could obtain credit. He did this by instructing that the financial statements always show a profit by failing to show the company’s payables, when he knew that was not the case. In addition, the defendant falsified a deposit of $350,000.00 to the Caisse as shareholder equity, and had the deposit slip produced to Trisura who would not otherwise have continued to advance bid and performance bonds to ICI. They did. As a result, Trisura sustained significant financial losses. I accept Mr Dagenais evidence that he was told by the defendant that the statements must always show a profit, that the defendant instructed that certain payables were not to be shown in the statements in order to show a profit, and that all statements were shown to the defendant before they were sent out. I accept his evidence that these payables were kept separately in a hard copy file, and that Mr Dagenais was told by the defendant that the true financial picture of ICI was not to be discussed with anyone but him. The evidence was clear that Trisura, the Caisse, Business Development Bank, and Acorn Partners advanced credit in one form or another to ICI in reliance upon the false statements. The factoring arrangement with Acorn was particularly dependent on the quality of the receivables, and the funds would not have continued to be advanced if the true picture had been known. Certainly the $50,000 loan would never have been advanced under any circumstance.
[317] I also find that the defendant falsified the shareholder equity in the company financial statements by showing loans from his brothers and from Dr Abou-Khier as shareholder’s equity.
[318] The evidence is that ICI never showed a profit from January, 2007 until its demise. I find beyond a reasonable doubt that ICI was insolvent from at least July 2007. The defence argument that there had been no need to put ICI into bankruptcy or that it was premature does not hold up in the face of the evidence. Putting ICI, which was clearly insolvent, into bankruptcy was the only way to ensure that the assets if any would be assembled and distributed to those creditors who could establish their claim. Otherwise there would have been no legal framework within which the competing claims could have been assessed. I am satisfied that the Bankruptcy was necessary for the orderly management of the assets of ICI and competing claimants where it was clearly insolvent.
[319] The statements prepared by Welch and Co for the period up to January 31, 2007 were understated. Had Welch & Co had had access to the payables which had been concealed on the defendant’s instructions, the statements would have shown a loss of $673,000 instead of a profit. Those statements were crucial to ICI being able to obtain further credit. These statements had been forwarded on the defendant’s instructions to the Caisse, BDC, Acorn Partners and Trisura. Both Mr Henderson of BDC and Mr Baribault of the Caisse confirmed in their filed evidence that they relied on the Welch & Co statements in deciding to grant ICI further credit. BDC offered $150,000 while the Caisse increased ISI’s line of credit by $300,000. Mr Baribault confirms that if he had known that ICI had not made a profit in 2006 or the first quarter of 2007, he would not have consented to the increase. Up until late 2007, Mr Dagenais had been able to conceal the true state of ICI’s financial affairs from Shayne Artelle of Acorn with the full knowledge of the defendant. He did so through a combination of delaying the information that was requested, and providing false information. While it was acknowledged that Acorn was more interested in the payables from the contracts than on ICI’s financial position, Mr Kemball of Acorn was clear that Acorn assumed ICI was paying the subcontractors and suppliers, relied on ICI to make those payments; and if Acorn had known it was insolvent and unable to make those payments it would have terminated the factoring arrangement.
[320] Beginning around July 2007, Mr Baribault noticed that Non-Sufficient Fund (NSF) cheques from ICI were becoming more regular. The problem accelerated in November to the point that he was considering closing the account given the time and energy that was being spent on the administration of NSF cheques. In December, he called a meeting with Mr Dagenais to discuss the matter and express his concern.
[321] A further example arose from the evidence of Mr Daher who at the time was with BDC. The defendant had asked Mr Daher, who he had known socially, if he would provide ICI with a letter of credit. Mr Daher sent the defendant a letter from BDC expressing interest in a credit arrangement provided that the Welch & Co statements showed a profit of $250,000. When the defendant sought further credit from BDC, and was refused because he had been a recent bankrupt, the defendant sent Mr Daher’s letter to support the successful granting of a loan of $150,000.00. The Daher letter was based on the false premise of an accurate financial statement, known by the defendant to be in fact false. The filed evidence of Mr Henderson confirms that if he had known that ICI had not in fact made a profit in 2006 or the first quarter of 2007, he would not have approved the additional financing of $150,000.
Count 3
AND FURTHER THAT Roland Eid, between April 21, 2005, and January 5, 2009, both dates inclusive, in the City of Ottawa and elsewhere in the Province of Ontario and elsewhere in Canada, and elsewhere in Lebanon, did by means of a false pretence cause a person to execute, make, accept, or endorse a valuable security contrary to section 363(1) (a) of the Criminal Code, and did thereby commit an offence pursuant to section 363 of that Code;
[322] The applicable legal principles are at paragraph 288.
[323] The evidence shows that the defendant made false pretences as defined in s 363 CCC that caused Trisura to believing that he had injected $350,000.00 into ICI when he had not, he failed to disclose that he had been a prior bankrupt, he provided Trisura with false financial statements; and misrepresented that the Dr Abou-Khier house being constructed on South Beach Boulevard was complete except for the landscaping when it was only half complete, and caused Trisura to grant a performance bond.
[324] Evidence of the $350,000.00 false deposit was described by Mr Dagenais and is confirmed in the Caisse banking records for the days in question. The false document was forwarded to Mr Mickalakos at Masters who forwarded the falsified deposit on to Trisura, who had requested the deposit into shareholder equity. As a consequence, Trisura extended a $5 million bond facility to ICI, and a bond was issued in respect to the Mother Theresa School project. Mr Sekine and Ms Mascitelli of Trisura both confirmed that if they had known the deposit had not been made, the bond facility would have been reduced; and if they had known the defendant had intentionally lied to them, they would not have granted a bond facility at all. Furthermore, all of the Trisura witnesses confirmed that if the defendant’s prior bankruptcy had not been concealed from them, they would have undertaken a more careful review, including the reasons and full details of the bankruptcy. That review may have caused Trisura to either decline the bond facility, or insist on other assurances.
[325] The defendant had financial statements forwarded to Trisura that he knew showed a false picture of ICI. Mr Sekine had noted that during his review he saw a reduction of the shareholder account but was encouraged by the ICI statements showing an increase in net profit. Of course, the net profits were illusory since the financial statements had failed to show all of the payables. As a consequence Trisura was misled. All of the Trisura witnesses said that if they had known the statements had been falsified, they would have terminated any bonding arrangements.
[326] The defendant had insisted on a performance bond for the Dr Abou-Khier house because it had not been finished by December 21, 2007 but he wanted full payment for it, in order to send the money to Lebanon. Trisura had initially balked at a performance bond for residential housing since this was outside their line of business. But when pushed, Trisura relented but only after being assured that only the landscaping in the amount of $40,000.00 remained to be done. In fact the evidence was clear that barely 50% of the house had been completed which would have exposed Trisura to significantly greater liability. In the result, however, because the defendant had not ensured that a signed bond be given to Dr Abou-Khier, the bond was declined and Trisura escaped liability. However, Dr Abou-Khier was deceived at the time into believing he had a performance bond for completion of his house when the defendant had failed to ensure he had a signed bond. He paid full price to the defendant for a half-finished house, then paid again to have the house completed.
Count 4 and Count 8
Count 4: AND FURTHER THAT Roland Eid, between April 21, 2005, and January 5, 2009, both dates inclusive, in the City of Ottawa, and elsewhere in the Province of Ontario, and elsewhere in Canada, and elsewhere in Lebanon, made fraudulent disposition of the property of 6364144 Canada Inc., operating as ICI Construction Management, a declared bankrupt as of January 30, 2008, contrary to section 19 8(1) (a) of the Bankruptcy and Insolvency Act, and did thereby commit an offence pursuant to section 198(1) of that Act;
Count 8: AND FURTHER THAT Roland Eid, between April 21, 2005, and January 5, 2009, both dates inclusive, in the City of Ottawa and elsewhere in the Province of Ontario and elsewhere in Canada, and elsewhere in Lebanon, did by deceit, falsehood or other fraudulent means defraud 6364144 Canada Inc., operating as ICI Construction Management of property, money, or valuable security having a value in excess of $5,000, contrary to Section 380(1) of the Criminal Code and did thereby commit an offence pursuant to section 380(1) (a) of that Code;
[327] The relevant legal principles are to be found at paragraphs 285, 286 and 289.
[328] The victim is ICI. The defendant continuously used the company funds as if they were his personal funds without acknowledging the expenses or withdrawals as loans in the financial statements; or as a taxable benefit for him. These personal expenses included his wedding, support payments to his ex-wife; and receivables that he collected for his own use, the house ICI built for Dr Abou-Khier that he sold and sent the proceeds to his personal bank account, and the Surgenor’s ICI vehicles that he attempted to take to Lebanon.
[329] While these items were discussed in the evidence, not all of them were quantified. For example Mr Dagenais’ evidence was that he entered the personal expenses into the ICI Advance to Shareholder Account. The printouts show the wedding expenses, and support payments to Selena Eid. In 2007, the defendant was paid $56,000 and his wife $51,000. From February 2006, to November, 2007 the account grew to $367,231.83. In addition, according to Mr Dagenais he paid personal credit card bills for the defendant, his wife and his in-laws out of ICI funds but did not show them in the Advance to Shareholder Account. He said that the defendant had on one occasion told him to charge one personal expense as “lumber for my house” – referring to the house ICI was building for Dr Abou-Khier. No year-end adjustments were made to the Shareholders Loan account; and the defendant never put the money back into the account.
[330] The defendant would have been entitled to take draws form the company, but he was required to account for them. He did not. By using ICI as his ATM (the observation of one of the potential lenders) he committed fraud against ICI contrary to s 380 of the Criminal Code. Since the company became bankrupt after clearly being insolvent, he contravened s 198(a) of the Bankruptcy and Insolvency Act when he fraudulently disposed of assets of ICI that also included the ICI proceeds of the Dr Abou-Khier house sale, and the ICI receivables factored by Acorn.
Count 6
AND FURTHER THAT Roland Eid, after or within one year immediately preceding January 30, 2008, in the City of Ottawa and elsewhere in the Province of Ontario and elsewhere in Canada and elsewhere in Lebanon, fraudulently concealed or removed property of a value of fifty dollars or more or any debt due to or from 6364144 Canada Inc., operating as ICI Construction Management, declared bankrupt on January 30, 2008, contrary to Section 198(l)(f) of the Bankruptcy and Insolvency Act, and did thereby commit an offence pursuant to section 198(1) of that Act;
[331] The applicable legal principles concerning this s 198(1) (f) Bankruptcy and Insolvency Act offence are found in paragraph 291. This concerns the defendant’s removal of the SUVs and the $1.7 million. The evidence is summarized under Count 1 above. I find the defendant fraudulently transferred $1.7 million dollars of ICI’s money to his own personal account in Lebanon. He also fraudulently attempted to convert the two SUVs (Surgenor’s) that were ICI property, to his own use and take them to Lebanon.
Count 7
AND FURTHER THAT Roland Eid, between November 1, 2007 and January 5, 2009, both dates inclusive, in the City of Ottawa and elsewhere in the Province of Ontario and elsewhere in Canada, and elsewhere in Lebanon, did use, transfer the possession of send, deliver, transmit, and/or dispose of property with intent to conceal or convert that property knowing or believing that all or part of the property was obtained as a result of the commission in Canada of a designated offence as defined by the Criminal Code, contrary to section 462.31 (l)(a) of the Criminal Code, and did thereby commit an offence pursuant to section 462.31(2) of that Code;
[332] The applicable legal principles concerning this s 462.31(1) (a) C.C.C. offence are found at paragraph 292. This offence arises out of the fact that the defendant had the money sent to Lebanon by way of electronic wire transfer knowing it was the product of a fraud; and includes the SUVs that the defendant had fraudulently shipped to Lebanon.
[333] The evidence is reviewed at paragraph under Count 1. I find the defendant transferred the possession of, delivered or attempted to deliver, transmitted and/or disposed of ICI’s money and SUVs to Lebanon knowing they were the product of a fraud.
Count 9
AND FURTHER THAT Roland Eid, between April 21, 2006, and January 5, 2009, both dates inclusive, in the City of Ottawa and elsewhere in the Province of Ontario and elsewhere in Canada, and elsewhere in Lebanon, did, knowing them to be false, make false documents in relation to 6364144 Canada Inc., operating as ICI Construction Management, with the intent that they be acted on as genuine, contrary to section 366 (1)(b) of the Criminal Code and did thereby commit an offence pursuant to section 367 of that Code;
[334] The applicable legal principles concerning this offence under s 366 (1) (b) C.C.C are to be found in paragraph 293 and arise from evidence of the fabrication of ICI financial statements and from the provision to Trisura of the fabricated evidence of a $350,000 deposit to shareholder equity in ICI.
[335] The evidence is reviewed under Count 1, and relates to false and fabricated information having been given to Welch & Co with the intention that Welch & Co would prepare ICI financial statements that would be false, but would be and were in fact relied upon by Trisura, Acorn, Caisse Desjardins, and BDC.
[336] The evidence is reviewed under Count 2, regarding the fabricated deposit to ICI shareholder equity that the defendant orchestrated, directed or carried out himself and provided to Trisura. Both the Welch & Co financial statements and the deposit slip were false in a material way and therefore constitute false documents as defined in the C.C.C.
[337] I find the defendant knowingly created, directed, or connived at the fabrication of the Welch & Co false financial statements and the false deposit slip intending that they be relied upon so as to obtain credit from Trisura, Acorn, Caisse Desjardins, and BDC; and bonding from Trisura.
Count 10
AND FURTHER THAT Roland Eid, between April 21, 2006, and January 5, 2009, both dates inclusive, in the City of Ottawa and elsewhere in the Province of Ontario and elsewhere in Canada, and elsewhere in Lebanon, did, knowing that documents in relation to 6364144 Canada Inc., operating as ICI Construction Management, were forged, caused or attempted to cause persons to use, deal with or act on those documents as if they were genuine, contrary to section 368 (1)(b) of the Criminal Code and did thereby omit an offence pursuant to section 368(1) (c) of that Code;
[338] The applicable legal principles to this s 368 (1) (b) C.C.C. offence are to be found in paragraph 294, and relate to the evidence under the previous count 9 – the false financial statements, and the false deposit slip. The additional evidence is that the defendant ensured that both the false financial statements and the false deposit slip were forwarded to Trisura, Caisse Desjardins, BDC, and Acorn as noted.
[339] I find the defendant did forward these false documents with the intention that they be relied upon contrary to s 368 (1) (b) and therefore committed an offence under s 368 (1) (c) C.C.C.
Honourable Justice Timothy Ray
Released: May 2, 2016
CITATION: R. v. Eid, 2016 ONSC 3221
COURT FILE NO.: 12-20041
DATE: 2016-05-02
ONTARIO
SUPERIOR COURT OF JUSTICE
HER MAJESTY THE QUEEN
– and –
ROLAND EID
REASONS FOR JUDGMENT
Justice Timothy Ray
Released: May 2, 2016